Early Financial Literacy Brings Lifetime Benefits

By Regina Johnson

Education and government join forces with support of the financial industry

With all the advantages their generations afford, including education and technology, there’s one thing the millennials and Generation Zers lack: financial literacy, according to financial advisors.

Without a fundamental knowledge of how money works, members of these generations could be marred with financial pitfalls, including high debt and an inability to buy a home or save for retirement.

“The early adulthood is when many critical decisions are made that can affect outcomes for decades to come, but few people are properly prepared to make them,” Jona than Freeman, managing director of Stonebridge Financial Group, a Pennsylvania-based financial services firm focusing on wealth management for families and corporate retirement plan consulting told Advisors Magazine.

Martin A. Federici, Jr., CEO and financial advisor at MF Advisers, Inc., agrees that financial literacy is essential for all, especially young adults and teens.

“The more educated people are regarding smart personal financial moves, they lessen the chances of putting themselves in difficult financial positions,” Federici said.

Both Federici and Freeman say taking on too much debt, having a lack of savings, investment mistakes, falling for get-rich-quick schemes, and not saving enough for retirement can all be attributed to a lack of financial education.

Freeman sees a trend developing with younger people trying to learn about personal finance and investing, but he is cautious.

“These new investors may only be following headlines and not have any idea about the companies they’re investing in,” he said. “Or, as has been the case recently, they might be investing all their savings into cryptocurrencies they heard about from friends or celebrities.”

Freeman suggests that people without financial expertise learn to tune out all the noise, seek sound advice, and develop strategies and long-term goals.

“The early earning years are crucial for setting good habits and getting a head start on financial stability. Even if money can’t buy happiness, financial stability can be the difference between surviving and thriving,” Freeman said.

According to Federici, financial literacy rates are inadequate across the U.S. Data from Florida-based annuity. org, an online financial educational resource shows that 75% of American teens lack confidence in their knowledge of personal finance, and 25% of Americans say they don’t have anyone they can ask for trust ed financial guidance. Data from the Florida-based digital platform also shows that in 2021, Americans reported losing an average of $1,389 because of a lack of personal financial knowledge.

“We must address these financial topics with all U.S. children, especially in high school. Dealing with finances is one of the most important skills young adults need to master,” Federici said.

The call to improve financial literacy is being heard in many circles.

Universities, high schools, and some financial institutions have begun to offer classes. Several states are in the process of implementing regulations that would require financial education to be a part of the curriculum.

According to the National Confer ence of State Legislatures, 37 states, Guam, Puerto Rico, and the District of Columbia, have bills focused on fi nancial literacy in the 2022 legislative session. For example, starting in the 2024-2025 school year, the state of Georgia will require students to take a half-credit financial literacy course in the 11th or 12th grades.

Federici says the U.S. Department of Education should set concrete goals to increase young people’s basic financial knowledge to manage personal financial matters success fully.

“I know that we try to educate our clients – no matter the age or experience level – whenever possible, and usually, they are quite appreciative. After all, knowing is half the battle!” Federici said.

Rosana Guardavaccaro, a financial planner at Barnum Financial Group, a Connecticut-based planning and consulting services firm, thinks schools should teach young people what to do with their income once they have started their careers.

“Getting started in my career was not so easy, but I knew it was what I wanted to do. I learned, too, that people don’t have to wait until high school or even college to begin to become financially literate,” she said.

To help teach financial literacy, Guadavaccaro created a series of children’s books titled, “Peter Saves For A Rainy Day,” and “Peter Takes the Train.” To help keep a child interested and entertained while with teaching them financial concepts, her books were created with visuals using color and a natural story-line according to Guadavaccaro.