Money Advice You Shouldn’t Pass on to Your Gen Z Kids
Not every money “rule of thumb” that you may have grown up adhering to is still relevant for your Gen Z kids. After all, this generation is growing up in a very different world than you did — they’ve come of age during a pandemic, they’re tech-savvy and the economy has changed.
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Although you may mean well, don’t give this outdated money advice to your Gen Z children.
Buying Is Always Better Than Renting
For older generations, buying a home is seen as a rite of passage — but this may not always be the best option for your kids.
“While buying is often a smart financial decision, it depends on your situation,” said Liz Frazier, CFP, executive director of financial literacy at Copper Banking. “If you plan to only be in the area for a few years or you don’t want the hassle of ownership, renting may be the better decision.”
More Education Is Always Better
As parents, you want to see your children succeed, but getting a higher degree may not always be the best pathway for your kids to thrive in their careers.
“Again, this may be true in some instances, but education is a major purchase and should be evaluated like any other investment,” Frazier said. “Parents and kids should discuss the cost versus reward of their education.”
It’s Rude To Discuss Money With Others
You may consider money a taboo topic, but it shouldn’t be.
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“This outdated wisdom is probably the most harmful of them all,” Frazier said. “We have created a generation of people who are intimidated and uncomfortable with finance because they haven’t been exposed to it. We should discuss money with our kids alongside all other important conversations, such as nutrition, safety and kindness. Money touches every part of our lives from graduation to retirement — our kids’ understanding of money will directly affect their success at every stage.”
When in Doubt, Google It
If your kids come to you with a financial question you don’t have the answer to, you may advise them to do some online research. But there are some less-than-reliable sources out there, so be careful when dispensing this advice.
“While the internet, search engines and online forums are great tools, they aren’t the best resources when it comes to personal finance — the primary reason being personal finance is just that, personal, and it’s going to look different for each and every household,” said Maureen Wright, CFP, financial advisor at Savant Wealth Management. “[It’s better to have] a thoughtful conversation with a financial professional who understands your financial situation, and can make recommendations and set guidelines accordingly.”
It’s OK To Have Debt
“Assuming that the majority of parents to Gen Z children fall between millennials and Generation X, the financial hallmark of these generations is their use of debt,” Wright said. “It’s within these generations that we see the rise of student and consumer debt. If there is a lesson that should NOT be passed along to their children, it’s being so laissez-faire about debt.”
Wright notes that having six figures worth of student loan debt has become “normal,” but it shouldn’t be.
“This level of comfort with debt and accepting it as part of life creates a domino effect that spills into other areas of life,” she said. “It can lead to misuse of credit card debt, auto loans and even mortgages. It should be taught early that having consumer debt is not part of life. If you can’t afford something, then you should move on or find a way to make it work given your financial circumstances through additional savings or delayed gratification.”
Keep Your Long-Term Savings in the Bank
Putting money that you don’t need right away into a savings account is generally thought of as good advice, but Kelly Crane, CFP, president and chief investment officer at Napa Valley Wealth Management, says that this is now outdated.
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“Interest rates are at an all-time low and inflation is rampant,” he said. “Long-term goals should be funded with investments that are designed to keep up with inflation. Using stocks, mutual funds and other investment vehicles that are designed for long-term investing will help your money grow at a pace that keeps up with or exceeds inflation, giving you a positive real rate of return and helping you achieve your long-term goals.”
However, a savings account is still an appropriate place to keep funds for shorter-term needs.
“Short-term reserves and emergency funds should always remain liquid and be kept in a safe place, like the bank, where you can access it at any time without any market risk,” Crane said.
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