Financial Education for Young Adults

1. Financial Education for Young Adults As adults, most of us have learned a few harsh lessons from poorly managing our money and know very well how our financial situation impacts our overall happiness and well-being. As parents, we do our best to teach our kids about money and avoid those harsh lessons, but there are plenty of life lessons to teach and personal finance doesn't always make it on our list. Teaching financial literacy in schools has become more widespread and post-secondary institutions may also offer financial literacy programs for students. But which financial lessons, habits, and tactics should parents try to instill at home on our teenagers, especially if our own money management knowledge and skills may be lacking? Wants vs needs & cost vs value Regardless of age, everyone needs to clearly differentiate between wants and needs and prioritize what we spend our money on. For young adults in particular, value and cost are two more important concepts they need to understand. The latest model iPhone or a carbon fiber mountain bike will really impress their friends, but a cheaper version may perform very similarly and provide a lot more value, especially if they are strapped for funds. Young people face a daily avalanche of marketing messages, and they need to learn to look through the hype and make objective, well-thought-out financial decisions. Plenty of very wealthy people (even billionaires like Warren Buffett) drive some pretty basic cars for a very good reason – it’s all they really need. If your kids have their eye on the newest must-have item, ask them them to explain the value other than being trendy or fashionable. For big-ticket items, make informed decision-making part of your kids’ financial wellness plan — have them to do some research and check out product reviews as well as shop around for the best price. Introduce basic investing concepts Financial literacy for teenagers should definitely include basic investing concepts and how to make money with money. Explain the power of compound interest and how investments can grow over time. Buying stocks or other investment products for your teenager is a great way to learn firsthand. There are plenty of teens with parents who took the time to explain stocks and shareholding at a level their kids can understand. Kids are fans of many large, publicly traded companies. Holding a few shares (in an informal trust account or simply in your name) of Disney, Roblox or McDonalds may not return enough to pay for university, but it will teach them about the risk and return of equities and get them started with the basics of investing. It’s true that a savings mindset developed early will pay back steadily over the course of a lifetime. However, developing an investing mindset from an early age will pay back HUGE over the course of a lifetime and set your kids up for long-term financial security and wealth building. Opening a tax-free savings account (TFSA) at age 18 is an excellent idea. Even if they can only scrape together $50 or $100

2. to deposit each month, if they invest it and let it compound until they retire, they are going to have a pretty nice retirement bonus! Teach the bad (and good) about credit and debt Credit is very easy to access these days and first-year post-secondary students are often able to get a credit card. Responsible use of this first credit card can help establish a credit score and they are very convenient — almost a necessity for some online transactions. On the other hand, easy access to credit cards (with generous spending limits and 20% interest!) and a few spontaneous or poorly thought-out spending decisions can derail a future before it even gets started. Student loans can also lead to big surprises post-graduation when you realize the amount of the monthly payment or apply for an auto loan or mortgage in the future. Although federally issued Canada Student Loans are now interest free, provincial student loans may still carry interest. Regardless of the interest, your children must be very aware that a student loan isn’t free money and paying it back isn't an option..... it will definitely cause some hardship and tough choices in their post-graduation lifestyle. Remember that financial education for students is an ongoing process. Encourage openness about money and create an environment where your children feel comfortable discussing money matters with you. Instilling responsible money habits from a young age and being a supportive resource as they build their financial literacy will help your money-savvy kids grow into financially savvy adults.