Modeling positive financial behaviors for the younger generation especially in affluent communities can pose unique challenges. Here are some key topics I’d like you to consider:
1. Understanding the concept of “enough”: In affluent communities, where material possessions are abundant, it’s essential to teach the young (and not so young!) that wealth is not solely defined by possessions. I like to keep my focus on President Roosevelt’s quote “Comparison is the thief of joy” and encourage a focus on spending that has lasting satisfaction rather than buying the next ‘in thing’. Usually, this includes understanding the role that money plays in their lives and how they wish to integrate financial security, spending, saving, and investing.
2. Value of Budgeting and Understanding their Spending: Teaching younger generations to follow and understand their income and expenses is crucial for financial independence and achieving life goals like homeownership and retirement. Helping them understand their spending patterns provides opportunities for money conversations and creates comfort around money conversations. The goal is to encourage them (however slowly) to plan their spending and create sustainable financial habits that will last them a lifetime.
3. Understanding the value of employment: Encouraging loved ones to recognize the value of a job or career is part of growing up. We all know that employment provides value beyond earning money since it can add unique opportunities. It will also provide them with a steady source of income, so they have money to eat out, do fun things with friends, and hopefully also begin saving.
Financial literacy for the younger generation is challenging since so much of their world is imbued by marketing. The challenge is how to model or engage with them not to crave what others seem to have but rather to understand what brings them long term satisfaction.
Edi Alvarez, CFP®
BS, BEd, MS