Why financial literacy needs to start early

In the world of finance, we often talk about the importance of financial literacy. As a society, we have a general understanding of why knowing how to manage your finances is essential. However, few have the knowledge to make informed financial decisions, and many learn this skill when it is too late. I am constantly reminded of a major financial mistake my family made that could have been avoided and led to a traumatic time in our lives.

In the midst of the Valley’s 90s housing boom, my father, an Indian immigrant, was determined to provide a better life for his children. So he boldly seized the opportunity to buy a comfortable house and we moved to the Valley. Once we arrived, our family poured all their energy into making the house a home, but soon the life we ​​had built fell apart.

My father, who had limited knowledge of the American financial system, took out an adjustable rate mortgage (or “ARM” as finance professionals call them) without understanding the implications. These types of mortgages fit specific time horizons and require you to assess whether they fit your goals. However, in our case, this was not the case. Eventually, the mortgage payment doubled every month, and my father, who had a modest job at a furniture store, was struggling to pay with no possibility of refinancing.

Eventually he was unable to make the payments and the property was seized. His lack of financial knowledge and naivety about the nuances of interest rates led to a situation we never imagined. At any moment we had to leave our house, a house filled with precious memories, and move into a cramped two-bedroom apartment donated by a family friend. We were lucky he knew my dad and his work ethic because otherwise we wouldn’t have been able to rent on the open market.

Even now, when I walk past our house, I shed a tear thinking back to the happy times of my childhood. Suffering an economic loss did have some benefits, however. My dad spent time becoming financially savvy. He persisted in seeking advice from others, rebuilt his credit, and eventually bought another home which he proudly paid for in seven years. His knowledge was generously shared, which laid my financial foundation and motivated me to develop my own financial acumen. My parents couldn’t afford to pay me to go to college, so I worked at a bank that offered tuition assistance through a college reimbursement program. A mentor helped me tremendously by explaining tuition reimbursement, a provision that saved me thousands of dollars. The salary I earned helped me pay my expenses and save.

Entering my childhood home at a young age made me realize the importance of educating future generations, especially at the high school level. Institutionalizing financial education can help families avoid pain and suffering, and the sooner you start, the better. Plus, starting at an early age can help adults make better financial decisions.

As economist and former Federal Reserve Board Chairman Alan Greenspan has said, “Financial education is a process that should begin at an early age and continue throughout life. This cumulative process builds the skills needed to make critical financial decisions that affect one’s ability to achieve assets…and improve economic well-being. Children and teens encounter money not as adults but during their teenage years, so educating them about finances at a young age is essential.

Parents and caregivers are essential companions on young people’s financial journeys and can help them make smarter choices with their money. They can create an optimal learning environment and use real, meaningful everyday situations for their children to teach financial literacy. Learning to be smart with money allows them to handle their first paycheck properly and stay out of debt later in life.

Those who are well versed in managing finances must mentor future generations. The dangers of not doing so can be disastrous. For example, according to the Financial Industry Regulatory Authority’s Investor Education Foundation, young adults who took state-mandated personal finance courses in high school are less likely to take interest-rate loans. higher than those who are not required to take such courses.

Educating children about finances early on is paramount to promoting financial stability for future generations. Having witnessed these pitfalls and seeing the seriousness of this societal challenge here in the Valley, I try to do my part by volunteering my time at local high schools to teach students about financial literacy. Because I don’t want others to go through what my family went through, I now actively participate in the financial education of others. We must all do our part as caregivers, educators and community leaders to support the financial literacy of future generations.

Jaspreet “Jesse” Puri is Executive Director and Branch Manager of UBS in Sherman Oaks.