Why Wealth Literacy is More Important than Financial Literacy, Part II

April 17, 2007 – According to a recent study conducted by Charles Schwab, today’s teenagers in the United States have huge expectations about the type of wealth that they will build as young adults. Of the 1,000 teenagers that participated in the survey, boys on average expected to be earning $173,000 a year while girls expected to be earning $114,200 annually. The reality is, however, that only 5% of all wage-earning adults in the U.S. earn six figure salaries.

The Schwab survey further discovered that nearly two-thirds of American teens aged 13-18 years-old believe that they were knowledgeable about money management, including budgeting, saving and investing. However, despite this typical braggadocio that accompanies teenagers, barely a third of them admitted to knowing how to budget money (41 percent), how to pay bills (34 percent), and how credit card interest and fees work (26 percent). Here is where this survey is lacking and where a crucial gap in understanding must be bridged.

Despite most teens lacking this knowledge, this is not the knowledge they need to build wealth. It is the knowledge they need to perhaps assume a baseline of fiscal responsibility as young adults, but hardly the knowledge that will help them assert their wealth-building muscles. As I stated in my last blog, teenagers need to learn the below subjects to acquire the critical gap in knowledge that will convert them from fiscally responsible young adults to adults capable of building wealth.

(1) How to Leverage Money
(2) The Four Pillars of Wealth
(3) How to Invest Money
(4) Gold and Precious Metals
(5) How to Leverage Time
(6) Debunking Widespread Investment Myths; and
(7) Networking

Many adults assume that their children will have zero interest in learning about how to build wealth, but the Schwab studies reveal otherwise. According to the Schwab survey, “nearly 9 in 10 say they want to learn how to make their money grow (89 percent). Two-thirds (65 percent) believe learning about money management is ‘interesting,’ and 60 percent say that learning about money management is one of their top priorities.” These stats are encouraging but the accessibility to the type of education that will truly benefit young adults is still highly guarded and certainly unavailable through typical channels of traditional education.

My curriculum is one place where teenagers certainly can acquire the proper knowledge regarding how to build wealth but it certainly is not the ONLY place. However, I am adamant about the fact that young adults will never acquire the proper education to learn the critical knowledge they need to build wealth through traditional education or certainly not through educational programs sponsored by investment firms. Why?

If investment firms truly provided the type of education that young adults needed to independently build wealth then it would render their own services obsolete and unnecessary. No firm would ever willfully engage in such self-defeating behavior. This would be analogous to a tobacco firm sponsoring educational programs about the deleterious effects of smoking including lung cancer. I imagine that such firm-sponsored educational programs carefully design the programs to spark an interest in young adults about investing while still leaving them dependent upon them to invest their money in the future. It’s the perfect set-up for investment firms. Shaping young minds to give them their future earnings. However, it is most definitely NOT what will help young adults build wealth. So wherever you seek information for not only your children but for yourself, ensure that the program you seek does not just teach you basic fiscal responsibility skills that still leave you dependent upon someone else to manage your money, but ensure that such a program is comprehensive to teach your children how to manage their money themselves as well.

[tags]wealth literacy, financial literacy, investment education[/tags]


J.S. Kim is the Founder and Managing Director of maalamalama, a comprehensive online investment course that uses novel, proprietary advanced wealth planning techniques and the long tail of investing to identify low-risk, high-reward investment opportunities that seek to return high double-digit and triple-digit returns.

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