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Are Your Children Financially Literate?

Posted August 08, 2012 in Advice Column

Many young adults are not, and they could be at risk of making some costly financial mistakes. Recent surveys have shown that many young adults are not only wayward financially, but also pessimistic about ever becoming wealthy.

The risk can be greater for young women. A 2006 OppenheimerFunds survey of women aged 26 – 39 found that 62 percent of respondents had no investment accounts at all, and 67 percent were living paycheck-to-paycheck. In a 2005 Consumer Federation of America/VISA USA survey, 55 percent of the women polled between ages 25 – 34 had emergency savings of less than $500.

In 2005, the CFA and the Financial Planning Association undertook joint surveys that illustrated a startling expectations gap. In the FPA survey, most of the financial planners contacted felt that more than 80 percent of young adults could amass $250,000 in net worth over a 30-year period, and that about 50 percent could accumulate $1 million of net worth in the same time span. But only 26 percent of the young consumers the CFA surveyed believed they could amass $200,000 at any point in their lives, and only 9 percent felt they could someday accumulate $1 million.

Don Blandin, CEO of the non-profit Investor Protection Trust, commented that “the entry of most Americans to the securities market is by buying a product rather than understanding the process.” Too many young investors elect to fly solo into the stock market through the Internet; too many young homebuyers know just enough (but not enough) about mortgage and lease options. And then there’s the widely publicized case of 24-year-old Casey Serin (iamfacingforeclosure.com), now $2.2 million in debt as a result of what he didn’t know about real estate investment.

The Ad Council and the American Institute of Certified Public Accountants have started a national campaign, Feed the Pig™, to try and correct this dilemma (learn more by visiting www.feedthepig.org). The National Council on Economic Education has also helped launch www.TheMint.org to provide young adults with vital financial principles.

If you would like to help your child develop a more firm financial base, please consult a financial professional.

Andy Hejlik is an Investment Advisor Representative with and Securities and Investment Advisory Services offered through Transamerica Financial Advisors, Inc. (TFA) member FINRA, SIPC and a Registered Investment Advisor. Non-Security products and services are not offered through TFA. KHI Financial Solutions and TFA are not affiliated.

Information supplied by Andy Hejlik, KHI Financial Solutions, 130 N. 25th St., 576-1800, www.khisolutions.com.

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