This was the weekend to move one of my boys back into college. I have done this several times now, and it is always a time of thought and reflection for me. You often realize in this process that young people have no experience in certain areas. Whether it is communicating with housing representatives or figuring out how to connect to the internet if the wall outlet is broken, the next generation often has not had the opportunity to figure out the right way to handle new situations.
On the drive home, I started thinking about how important it is to teach the next generation important processes and, in some cases, assist to make activities simpler. At LeConte Wealth, we pride ourselves on helping the next generation achieve financial stability and success that the previous generation desires for them. Here are some strategies and ways your advisor and you can encourage and benefit the next generation:
- Talk with the Next Generation:
- Often I hear “no one ever explained that to me”, “I wish I would have known that sooner”, or “I do not know what the plan was” when I discuss poor money management with clients. So, take the time to discuss important topics and even family goals for wealth with the next generation.
- Financial Literacy Education:
- Teach Basic Concepts: Start with basics like budgeting, saving, investing, giving and understanding credit. There are many resources available from online courses to educational apps.
- Encourage Reading: Recommend books, blogs, and articles on personal finance. Classic books like “The Total Money Makeover” by Dave Ramsey can be helpful and enlightening on the basics of financial literacy.
- Encourage Savings Habits:
- Start Early: Open a savings or investment account for young people to teach them about capital gains, interest, and compounding. Stress the benefits of saving early to the next generation.
- Set Goals: Help them set short-term and long-term financial goals, such as saving for a car or college.
- Teach Investing:
- Introduce the Basics: Explain concepts like stocks, bonds, mutual funds, exchange-traded funds, and the importance of diversification and seeking help from professionals when your portfolio balances need extra attention.
- Discuss Debt Management:
- Credit Cards: Explain how credit works, the importance of paying off balances in full, and the impact of interest rates.
- Mortgage Loans: Explain the importance of down payments, shorter loans, and the impact of interest rates on the value you can afford.
- Have a Plan:
- Retirement Savings: Even though it seems distant, starting early with retirement accounts like a 401(k), traditional IRA, and specifically a ROTH IRA can have significant long-term benefits.
- Emergency Fund: Stress the importance of having an emergency fund to cover unexpected expenses.
- Excess Cash: Learn that after you have established a sufficient emergency fund, excess cash needs to be invested for the longer-term goals.
- Lead by Example:
- Model Good Behavior: Demonstrate responsible financial behavior, such as budgeting, saving, charitable giving and investing. Children often learn by observing their parents’ spending habits.
- Encourage Responsible Spending:
- Smart Shopping: Teach them about comparing prices, seeking value for money, and avoiding impulse buys.
- Financial Discipline: As Dave Ramsey is famous for saying, discuss the importance of living within one’s means and acting your wage.
We have seen many instances recently that could have been avoided with just a little communication. Often, you do not even realize there is an issue until you are in the deep end of a financial struggle. That is why you must be proactive in the communication related to your financial affairs. If you need assistance coordinating your financial picture and transitional discussions or need help guiding someone in the next generation to get off to good start, our team at LeConte Wealth is available to help you.
