Improving Youth Financial Literacy Makes For Wise Investing

Understanding how to manage money and invest wisely is a skill no longer reserved for adults and kids of wealthy individuals. Rather, such knowledge when imparted to all young people can help them make informed decisions about their finances, set goals, and work towards achieving them.

In the United States alone, a lot of work is required to improve financial literacy among young people. According to CEE’s 2020 survey, only 21 states require high school students to take a personal finance course to graduate. CEE is hoping to increase this number to more states in the coming years.

Fortunately, a number of banks, startups, and private institutions are offering financial literacy courses and reading materials for Gen Z and Gen Alpha learners.

Companies promoting financial literacy

Wells Fargo’s (WFC) Hands on Banking provides helpful money management tools for young people of all ages. Their website covers comprehensive information on topics ranging from banking, cars, credit and loans to goal setting, investing, and money management.

TD Bank (TD) is also significantly contributing towards the financial education of youth. TD Bank WOW! Zone Financial Education Resources are designed to help K–12 educators teach children and teens about money management, saving, spending, credit scores, and investing. Schools can also hire TD Bank employee volunteers to teach a virtual or in-person session for free.

Validea's Patient Investor model, based on the published strategy of Warren Buffett, gives a 65% rating to the TD stock. This rating is based on the firm’s underlying fundamentals and the stock’s valuation. Typically, a score of 80% or above shows the strategy’s interest in stock and 90% or more means strong interest. Peter Lynch, on the other hand, gives TD a score of 81% based on the stock reasonable price relative to earnings growth and also due to its strong balance sheets.

Another bank contributing towards financial education is Charles Schwab. Since 2003, Charles Schwab (SCHW), in partnership with Boys & Girls Clubs, created a personal finance course that has reached more than one million teens to date. In 2021, The Charles Schwab Foundation announced free access to personal finance courses for every middle and high school in the U.S. by 2025.

Shareholder Yield Investor's model based, on the published strategy of Meb Faber, has given a high rating of 55% to SCHW. The stock also saw a 1.2% ETF inflow, along with other companies such as American Express Co. and Marsh & McLennan Companies Inc.

A variety of smaller firms are also offering products to meet the needs mentioned above with loans connected directly to borrowers’ bank accounts to control credit use and loan repayment, often with related apps. They are primarily for those who have turned 18 such as CreditFresh and PetalCard.

Improving financial literacy through games

Targeting young people under the age of 21 to learn about dry financial concepts can be challenging. However, with a little sprinkle of creativity, a lot can be achieved. Games — a popular hobby among Gen Z and Gen Alpha youth, is a great medium for imparting financial knowledge among young learners.

Celebrity Calamity, for example, is an online game that teaches money management skills to prevent a celebrity from hitting a calamity. The testers of the game, particularly women aged 18-35, reported a 15-30% increase in confidence in their financial skills after playing the game. The testers also reported an improved knowledge of concepts like credit limits, credit vs. debit, APR, and finance charges.

Companies like Ally Banks are taking a step further. By utilizing traditional platforms such as Minecraft, they are targeting a huge base of young gamers who are already regulars on the platform. Fintropolis map for Minecraft is a space that introduces and helps familiarize students with financial concepts. It provides scenarios where learners can make decisions related to spending vs. saving.

The stock has seen a slight decline in price in the last few months and is trading around $28 on average. On the Peter Lynch’s P/E/Growth Investor model, (ALLY) rates at 81% based on the underlying fundamentals and the stock’s valuation. This is a good indicator of the model’s interest in the stock – a potential buy for investors.

Kids of today are tomorrow’s adults, and sound financial knowledge at an early age can set the foundation for long-term financial security. As the demand for financial literacy among youth gains momentum, the demand for products and services that support financial development will also see proliferation. Investing in companies that are positioned to meet this demand could yield long-term growth potential for investors.

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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