Starting out … starting right

I recently volunteered to give a course on basic finances for young couples. My thinking was that I would help them fine-tune the financial knowledge they accumulated as teenagers and young single adults, and help them focus their financial lives as new couples. The group comprised husbands and wives with a variety of career paths between them. As it turned out, the common denominators were their stage in life (relatively newlywed) and unfortunately their general lack of basic financial knowledge.

I’ll confess that I was taken aback a little (although that tends to be my reaction often when I give courses and hear the range of questions), albeit even happier that I was giving the course as the need was greater than I had thought. It became clear to me that our youth are majorly under-educated in financial issues. I have written in the past about the importance of financial education for our children at the different stages of their lives, making them aware of finances with age appropriate jobs, but I think I assumed, mistakenly, that our children absorb financial knowhow at home through their parents’ examples and via the many various sources of information available to the public. 

Most parents’ natural instinct is to do, and often give, as much as possible to make things easier for their kids. But the truth is, although it sounds harsh, it is only by taking responsibility for their finances that your children will learn and be able to make the correct decisions.

The best parental help

The best help you can give your married children is to impress upon them the importance of taking control of their financial lives by learning about the different aspects. Discuss finances with them and be honest in your conversations. Let them benefit from your experience and hear about your mistakes. Explain your financial thinking, and the rationale behind your spending priorities in the various elements of your life. Stress the importance of finding the information they need to make educated financial decisions. What you shouldn’t do is treat them like minors by making all the major decisions.   By coddling them financially you are probably incapacitating them for the future.

Make sure they understand and maximize the benefits of their salary. (See our recent article which details the different components.)

Compound interest should be a term that generates excitement rather than a glazed look. As we age we recognize how quickly the decades race by, a perspective not shared by youngsters. But by starting their savings plans when they are decades from retirement, they benefit from many years of accumulated wealth and the accompanying compound interest.

If they have savings accounts (whether they are kupot gemel, pensions, or Bituach Leumi kids’ savings plans), they need to choose where they should be held, in a bank or investment house, and they need to choose the appropriate stock exposure in their account. For regular savings accounts they can keep their money with the banks earning virtually no interest, or choose mutual funds or kranot sal to invest. If they are unfamiliar with these terms they definitely need to up their ante.

There are unlimited resources available to them – free, or subsidized seminars, online courses, an abundance of information on the internet, and even networking with friends and family. It is important that they don’t become overwhelmed, rather focus on what is important to them and their lifestyle.

When we work with our clients we help them make practical decisions, rather than give them a grandiose plan that will be too overwhelming for them to ever follow. Here too, young couples need the critical information required to make decisions that reflect their values.  Help them to improve their financial aptitude by focusing on only a few initial decisions that will help them.  Choose one item that will immediately improve their wellbeing as well as a long-term goal, and lead them through the process of how to evaluate the issue.  This model will become critical as they increase their control over their finances. 

Financial education is equally crucial for men and women, regardless of mathematical aptitude, and at virtually all ages. Young couples starting out together deserve the opportunity to create a stable financial life together. Give them that chance by teaching them to be independent.