3 Things You Must Know to Be Financially Literate

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By Russ Hill

In honor of National Financial Literacy Month, I’ve been thinking about personal finance strategies we should be passing along to younger generations to help them be successful. At Halbert Hargrove, we’re often asked by our clients to engage with their adult children in helping them develop a skill set, along with a solid working vocabulary, concerning saving and investing with the end goal of financial security.

See Also: 10 Things Every Kid Should Know About Money by Age 18

What many of us typically think of as the nuts and bolts of personal finance—how to budget, how to avoid and manage debt, how important it is to diversify the money you invest—is essential to anyone who wants to gain a solid financial footing. But to be able to fully embrace a rewarding and secure financial life, more fluency is required. The value of a job, of a retirement plan and of carrying insurance sufficient to your needs are good examples. Millennials need to be as literate about personal finance as they are about craft beer, indie bands and apps.
Decisions made today can make a sizeable difference 50 years from now. Understanding the consequences should be a key aim of financial literacy. Here are three meta-concepts for Millennials to chew on. Think about sharing them with your family.
1. Your most valuable asset is yourself.
For the majority of people during their working years, their human capital—their ability to earn money—is their largest single financial asset. The obvious question is: How will each invest his or her own human capital? For all of us, a long-term investment horizon makes all the difference, but Millennials are better positioned to capitalize on this in order to successfully shape their futures and to contribute to the greater good of their communities.

2. Our brains are booby-trapped to make irrational decisions about money and investing.
3. It’s helpful to think of your finances in terms of managing risks as well as reaching for goals.
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