With life expectancy predicted to reach 90 years by 2050, ensuring young people have a considered approach to financial planning is paramount.
The good news is we’re all living longer – hopefully! Worldwide studies have shown that around every ten years, life expectancy increases by two to three years – mainly because of better health, better diets and advances in medical science. If this trend continues, by 2050 average life expectancy will be as high as 90 years.
The bad news is we’re not saving enough for our future and much of the reason behind this is poor levels of financial understanding and education.
An OECD (Organisation for Economic Co-operation and Development) study in 2012 tested individuals from 14 different countries on their levels of financial knowledge. The results revealed that out of eight questions, no single country had more than 70% of its population answering at least six correctly.
Will improved financial literacy really improve long term financial planning?
With young people in 2014 facing the possibility of more than 30 years’ worth of retirement potentially supporting two or possibly three generations above them, as well as their own children, setting aside money for the future has never been more important.
Where can young people learn these skills?
Recognising the long term benefits of financial literacy, several countries have put in place financial education initiatives. Financial literacy is being added to the National Curriculum in UK schools in September and in Saudi Arabia, the elements of good financial behaviour are already being taught in schools and universities. But, it’s never too early to begin instilling a culture of saving and parents can play an important role in establishing a positive attitude.
Explain the cost of debt: Not all debt is necessarily bad – most people will need a mortgage to buy a property which can be considered as a long term (and real) asset but some debt, such as credit or store cards, can be costly and hard to eliminate.
For many parents coaching their children in money matters is a challenge as they themselves don’t have the necessary skills but, help is at hand.
Saving money is neither an art nor a science; rather it is somewhere in between and to do it successfully requires both dedication and hard work. Encouraging a culture of saving in young people is the responsibility both of parents and the education system, with parents providing the “art” and schools and universities taking care of the “science.” By working together, young people will be able to tackle money management with much greater confidence ensuring that no matter how long their retirement, their money will go the distance.