But they lack confidence in their skills

Nearly half of American teens say they are concerned that their general lack of understanding basic financial matters will keep them from achieving economic security in their adult lives.

In a new survey from Junior Achievement – the national organization dedicated to helping high school students learn how to run businesses and gain financial skills – 46 percent of the respondents ranging in age from 13 to 17 indicated they view their own lack of knowledge regarding money matters as a “major” barrier to their future financial security.

That percentage reflects similar numbers reported in prior years – and if looked at only in its own silo, the trend is discouraging to those working to ramp up the financial capability and knowledge of the nation’s teenage population.
“It is just frustrating,” said Jack E. Kosakowski, president and CEO of Junior Achievement USA in a MSN.com April 2021 article. “Year after year, we keep seeing the same challenges, despite people doing their very best to turn things around.

The JA study conducted in late March 2021 represents a departure from previous surveys solely focused on what percentage of teens could correctly answer rudimentary financial questions. This study expanded its attention to include how the perceived lack of financial skills made the teens feel negatively regarding their potential to succeed.

It isn’t that the teens don’t care about money and being proficient with its usage.

They do.

In fact, it appears they care a lot – 97 percent of teens surveyed indicated that financial literacy is important, according to a recent study released by Step, a new mobile banking startup promising to educate teens on sound money practices so they can make informed financial decisions now and in the future. The company, founded in 2018 and based in California’s Silicon Valley, concentrates on providing parents with tools to teach their children under the age of 18 fiscal responsibility by providing FDIC-backed bank accounts and VISA cards “designed for the next generation.”

The founders of Step, CJ MacDonald and Alexey Kalinichenko, designed their system so that kids can make saving and spending decisions independent of guardian or parental control, but the adult(s) sponsoring the child’s account are notified when such decisions are made.

It gives kids the opportunity to make mistakes without drastic penalties – a luxury they won’t have as adults.

Hilary S. Jones Rojo, CEO and wealth advisor with Guardian Wealth Builders, LLC, located in Holbrook, Arizona, supports intentional financial education efforts aimed at the younger generation in hopes that children will avoid the common financial mistakes of youth such as credit card abuse and poor spending habits. As a part-time adjunct faculty member at a local community college, she welcomed the opportunity to create and teach a personal finance course among other business courses offered at the college.

“I was amazed how few of my students even knew what a stock or a bond was or how to finance a business or a home,” Jones Rojo said.

Start Learning at Home

The reality that life is full of hard lessons applies to financial education as well. It is even more relevant when parents start teaching kids about government taxation and its impact on their finances.
One financial professional – a mom herself – believes parents are the best choice to introduce the role of taxes in a financial life.

Kelli Lanino, a financial advisor and branch manager at KL Wealth Strategies based in Riverhead, New York, designated taxes as one of three buckets she established with her children. It is a mini version of the bucket system she uses at work for her clients, but its application is apropos. The three buckets are: current needs/wants; future needs/wants; and taxes.

“The tax portion was the harder conversation,” she admits. “But they had to understand that not every penny they made was truly theirs to spend.”

The discipline to adhere to not overspending in each bucket didn’t come easy, she said, but years later the dividends of her children having a firm grasp of basic financial knowledge was well worth it.

“My son once told that he was the only one among his peers who knew how to handle his monthly finances, including saving in a 401K/IRA,” Lanino said. “Unfortunately, if children are not taught these basic concepts at home, and they are also not taught in school, it sets them up for financial failure in life.”

Stats That Motivate Adults to Educate Youth

Here are some glimmers of hope that may encourage grown-ups to make sure the next generation learns financial lessons.

Watching their parents and or guardians struggle financially through the COVID-19 pandemic has motivated youth to be in a better financial position, according to yahoo!finance.com: 70 percent of teens in the Step survey indicated the correct definition of a credit score, 56 percent were aware of cryptocurrency, and 55 percent could explain how a federal stimulus bill works.

Youth receiving financial education prior to age 18 have better average credit scores and lower rates of delinquency as adults, according to data from the Financial Industry Regulatory Authority’s Investor Education Foundation.

“Notable improvements” in credit outcomes were documented by the foundation for 18 to 22 year-olds in three states – Idaho, Georgia and Texas – where the Council for Economic Education rates the mandatory financial education in secondary schools as “rigorous” as compared to other states.

And here’s a number to encourage parents of college-bound teens: The National Endowment for Financial Education showed that teens required to take courses in personal finance are more likely to utilize lower-cost loans and grants for higher education, as reported by CNBC.

A Long-Term Investment

Improving youth financial education won’t happen overnight, but each effort can help.

“There is a causal link with literacy and financial outcomes,” Gary Mottola, director of research at the Financial Industry Regulatory Authority Foundation in Washington, D.C., told CNBC. Noting that finance is a lifelong lesson, he continued, “financial education is not a one-and-done endeavor just like math is not a one-and-done endeavor. A more constant drumbeat of financial education is likely more effective.”