Investing basics and financial planning are both important topics to learn—but unfortunately, not always the most glamorous. It may take some creativity to intrigue young people regarding financial literacy. As with so many areas of finance, you can never start too early!
At the very least, you can help your children get ahead by educating them on investing and financial planning definitions, processes, and best practices. Try to pique the interest of your kids and young adults in some of the essential topics below.
Investing Basics
First, ensure your kids understand stocks, bonds, commodities, and real estate. Discuss how they can play a role in building a portfolio.
Next, review questions like:
- What kind of historical returns have investors earned in these types of investments?
- Why does cash in the bank usually lose against these investments when compared over longer periods of time?
Remove the emotion from investing by educating yourself. Shying away from things you don’t know is understandable, but even young people should understand the tools and strategies to increase their wealth. This will also remove a lot of the anxiety around investing and finances.
Financial Planning
While financial planning topics are extremely broad, here are a few important lessons to cover with young people.
Let’s start with debt management. Begin by highlighting why it’s crucial NOT to take on debt you can’t pay back. Review guidelines for home and auto debts—after all, a car is the first significant expense for many young adults. Ensure your kids understand:
- How to save and budget for these expenses
- What to look for in interest rates
- Implications of down payments
- Budgeting for monthly loan payments
- Strategies for reducing paid interest and paying off debt quickly
Another area we see so many people get a late start on is retirement savings. Young people must understand that THEY have to save for their own future—no one else will! As soon as they have a job that offers a 401(k), they should contribute to it. Discuss other retirement vehicles, such as Traditional and Roth IRAs, so your children know all their options as they enter adulthood and earn more.
Speaking of debt management and retirement strategies, young people should also learn the power of compound interest. Address how it could impact outstanding debts or earn them more money on investments.
Last but certainly not least, foster open conversations about taxes from a young age. Ensure your kids understand they’ll have to pay taxes based on their income and discuss ways to pay less when possible (e.g., tax credits and deductible expenses). Taxes are just a puzzle, but learning the rules will help minimize how much money you give back to the government—and help you keep more for your future. Taxes are a profitable puzzle to understand.
Your Financial Partner from the Basics & Beyond
At Carlson Investments, we are passionate about helping not only individuals manage their finances but also entire families. We believe everyone should be empowered to make the most of their hard-earned money by understanding how investments, finances, and taxes work.
Pro tip: Consider gamifying the learning process! Invent games and incentives to encourage their learning.
And if you’d like to take your kids’ financial education one step further with an outside perspective, contact us today for insights.
Carlson Investments does not provide tax, legal, or accounting advice. This content has been written for informational purposes only. Always consult your individual tax, legal, or financial professionals for advice tailored to your situation.
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