Did you know that, according to the 2021 Student Money Survey, almost three-quarters of young people say they wished they’d received a better financial education as they were growing up?
As important as it might be to our lives, money can still be a taboo subject in many families. But even if it might seem like an uncomfortable topic, breaking down this barrier can help the younger people in your life to benefit from your knowledge and experience.
Sitting down with them and discussing finances helps to ensure they can manage their money effectively when they’re old enough to fly the nest. So, read on for three great reasons why it’s important to talk to your children and grandchildren about money.
1. The rising cost of living means budgeting is an essential skill
As you’ll know, being able to budget properly can be invaluable when it comes to building your wealth. Despite this, according to the Student Money Survey, 1 in 10 young people have never practised this skill until they left for university.
As you’ll know, in the past few weeks there has been a surge in the cost of living. According to the Office for National Statistics (ONS), the Consumer Price Index (CPI) measure of inflation rose to 9.1% in the year to May 2022.
With the cost of food and fuel increasing sharply, if you have relatives who have never had to budget before they could easily run into problems. If they aren’t able to cut back their spending to manage their money more effectively, there’s a real chance that they may fall into debt.
That’s why, if you have children or grandchildren who are feeling the pinch, it can be useful to sit down with them to discuss different strategies for budgeting.
There are a variety of options to choose from, such as zero-balance budgeting or the 50:30:20 method. Not every strategy is right for everyone, though, so comparing the benefits of different options can be useful to find the one that’s right for your loved ones.
2. Your loved ones may not know about the benefits of financial protection
Another important reason to talk about finances with your children and grandchildren is that while you’ll be aware of the value of protection, they may not be.
As useful as cover can be, many people don’t know how much it can benefit them. In fact, according to a survey by Unbiased, Brits are actually more likely to seek insurance for their pets than themselves!
If your loved ones encounter an unexpected issue on their journey through life, having the right type of protection in place can be incredibly useful. For example, if they fell ill and were unable to work, having cover in place could help them to keep paying their bills while they recover.
As you’ll know, there are a variety of different types of protection that could help them but it isn’t always obvious which ones they may need. This is why it can be useful to discuss the topic with your loved ones, so they can benefit from your greater knowledge.
3. Unrealistic expectations of investing returns could make them vulnerable to scams
Since the start of the pandemic, there has been an uptick in the number of young people getting involved with the stock market. According to a report by the Royal Mint, Gen Z are set to invest £9.4 billion in the 2022/23 financial year.
Of course, while it’s good to see more young people taking an interest in their financial future, it’s important to ensure they are well-informed about the risks. If they aren’t, not only could they make rash investing decisions, but they could also fall victim to scams.
For people unfamiliar with investing, it can be easy to be lured into fake investment schemes that promise unusually high returns. But, of course, once the scammer has been sent the money, they often disappear along with the victim’s cash.
If this happens, and they lost a large amount of money, it could seriously affect your loved ones’ progress towards their goals. For example, they may have to delay the purchase of their first home, since they no longer have enough for a mortgage deposit.
This is why, if you have loved ones who may be interested in investing their wealth, it can be useful to talk about it with them. In doing so, you can give them a better idea of what to expect and so help them to avoid making a mistake with their money.
Get in touch
If you want to brush up on your own financial knowledge while you’re teaching your loved ones, we can help. Please email us at email@example.com or call us on 0208 882 2979.
The value of your investment can go down as well as up and you may not get back the full amount you invested. Past performance is not a reliable indicator of future performance.