The Power of Financial Literacy: Why Advisors Should Prioritize Engaging and Educating the Next Generation

When it comes to financial literacy, there’s at least one thing almost every parent can agree upon: kids need more. According to a study completed by the National Financial Educators Council (NFEC), 46.6% of respondents, across all age groups, indicated neither parent taught them about personal finance. This result was true amongst all age groups from 18-65+. Key financial habits, such as saving, budgeting, and utilizing credit, are essential survival tools every young adult will need to understand. Creating opportunities to learn and test knowledge well before graduating provides the best chance for future financial well-being.

In a 2019 PWC study, 71% of millennials in the US said that their stress related to their finances had increased substantially in the last 12 months. We also know that the Pandemic and recent inflation have impacted the number of Americans who are struggling with finances. Because financial stress is linked to physical and mental health, and also creates instability within personal relationships, parents should be concerned about the lack of financial literacy resources for children today. Pinpointing this issue further, FINRA released a study of individuals with varying levels of financial literacy. It indicated a sharp difference in financial stability relating to financial literacy levels. Sixty-five percent of those with lower financial literacy scores spent more than they earned, and only 42% had a three-month emergency fund set aside.

Where Financial Advisors Come In

Teaching great financial habits at an early age is essential for the overall financial wellbeing of our entire country. It builds strong, independently resourceful individuals who are equipped to move us forward. Preventing unnecessary financial stress could improve the health of our youth, both physically and mentally, and empower them with the confidence to discuss any financial challenges with their family without fear of shame or rejection.

Financial advisors understand this relationship between health and finances. Creating space and comfort for developing a sound financial foundation is at the core of why financial advisors are in this profession. The financial services industry is still relatively young and has a lot to offer next generations, with one area of great opportunity being financial literacy. Better informed consumers tend to not only make better decisions, but also seek out advice from accredited professionals. Understanding how to accumulate wealth, manage it, and make key life decisions that employ the power of that wealth, are all primary discussions that consumers have with their financial advisor. Every advisor should be so lucky as to empower clients and their next generations with life-changing advice – talk about creating ongoing loyalty!

With financial literacy being so critical to the future of our children, why is it still so challenging to provide access to this guidance? Advisors certainly have a lot on their plate servicing existing clients, and it’s not unreasonable to ask how much time you can really dedicate to building out new resources for clients’ children. The default opinion may be that it’s not your target audience and you won’t make any immediate return-on-investment for these financial literacy efforts. But perhaps it’s time to look at educating the next generation in another light.

Clients clearly value the importance of financial knowledge. They employ your services to improve their lives. Extending this same value to their children could, over time, create savvier individuals who appreciate the value of money, and make smarter choices about how they spend it. But providing tailored, age-appropriate information at the right time is critical. It needs to be shared at the right intervals and build upon the basics. Advisors don’t have heaps of time to build out and monitor the delivery of these resources.

Adding Scalability to Financial Literacy

Enter Bento Engine’s Children and Wealth Program, which consists of educational, client-ready, age-based financial advice, developed with the assistance of respected experts including Susan Doty and Mac Gardner, and is designed to help caring parents introduce their children to the important concepts of money and wealth. A recent Chase study showed that more than 80% of parents are looking for additional resources to help teach their children about good financial habits. Through Bento Engine’s program, advisors can access age-appropriate advice and tools, and trigger automation that ensures the right advice is delivered at the right time. Some examples of this include a series of resources at each milestone age, such as:

•   At age 4: Introduce children to currency, how coins have different values and the impact of different combinations. Part of this recommendation includes a game, poem, chant, and song approach.
•   At age 8: Change your child’s allowance amount and structure to encourage longer-range thinking, more impactful decisions, and increased gratification delay. This includes suggested activities, sources for additional content, and adjustments to behaviors and timelines.
•   At age 12: Help your child prepare for their first job by earning certification credentials. Included with this are resources for testing and enhancing skill sets, along with ideas on which alternate income sources may provide the most impact towards achieving their personal financial goals.

With more emphasis on providing value to clients than ever before, Bento Engine understands the importance of automated, well-timed advice. As parents face continued pressure to guide and arm their children with the best advice possible, financial advisors utilizing Bento Engine’s Children & Wealth resources can be even greater heroes. Stimulating powerful life-long financial habits will not only create a smarter future client base, but a happier, financially independent group of consumers who see financial advisors as true partners in their success.

Learn more about putting the Children and Wealth program to work for your clients by scheduling a demo!