Affluent families frequently hire knowledgeable professional advisors to assist them in managing their money, legal affairs, and commercial operations. The only reason they need to focus on financial literacy is that they want a successor for their family office services.
Even if a business successor is actively involved in the family business, a family member should take on a more active role in financial management if circumstances change, and should have the financial literacy to ensure the family’s wealth is preserved.
Here in this article, we will discuss three reasons why financial literacy is important.
It’s never too early to start educating your family about finance. Covering the fundamentals is an excellent first step. Families who are financially literate not only handle their money more confidently and how to manage problems as they come.
1. Lack of financial knowledge has painful consequences
Discussing family finances with adult children, regardless of age, is very crucial. Starting the dialogue is a crucial step in long-term wealth planning, even if it isn’t always easy. Debt or a lack of funds can make life extremely difficult for a person at any point of life. Financial issues can lead to divorce, poor health, depression, and bankruptcy, among other things.
2. Financial literacy leads to a healthier life
Moreover half of the millennials (51%) believe their lack of personal finance knowledge is preventing them from progressing financially, compared to just 43% of Gen Z and 26% of Gen X and older respondents. And they’re right: it’s keeping them from realising their full potential. There are numerous advantages to having a financial education, including:
- Encourages people to save money.
- Budgeting promotes responsibility and awareness.
3. Help survive Pandemics
Many families have been forced to live on lower incomes as a result of the pandemic’s economic impact, which can lead to increased stress and, in turn, have an influence on children.
When talking to children about financial literacy during a crisis, you can educate them with the tools they need to prepare for and survive in an emergency.
Poor financial literacy can have serious effects on a family business: one of the primary causes of financial failure in families and family businesses is a lack of understanding of how to manage money both inside and outside the business and how to invest family wealth.
Your family’s potential to handle business concerns and manage important financial transitions might be severely harmed by a lack of financial knowledge.