How multigenerational living highlights the need for holistic financial education

No matter who you ask, everyone has a story about how the pandemic has changed their life in one way or another.

A staggering number of households entered the crisis without the financial safety nets required to weather the storm. Others used repeated lockdowns to save and invest the money they’d previously spent on restaurants, new clothes and travel.

The pandemic served as a universal wakeup call and a push to overhaul our attitude to money, whether we have a healthy bank balance or not.

Breaking the money taboo

One group that have been well placed to reassess their money management skills are those who’ve moved in with their parents.

At a time of extreme uncertainty, living under one roof allowed families to divide living costs and lessen the financial burden. It also meant parents and children could spend more time with one another without worrying about being separated by restrictions.

According to a piece in the Wall Street Journal, this multigenerational living situation also inspired people to put their finances firmly under the microscope.

While talking about money might have once been a taboo, for many it became a necessity in order to get by. Families were forced to discuss their incomes and expenditure with one another to determine how they’d make things work.

For frugal parents of adult children who rebelled at the first sign of freedom, the pandemic might have given them an element of ‘I told you so’ satisfaction.

Rogelio Meza, 27, told the Wall Street Journal that the pandemic taught him how little he needs to be happy.

“Before living again with his mother and father, for example, he would frequently order takeout for lunch and dinner,” writes journalist Taylor Nakagawa. “But the home-cooked meals he has enjoyed at home, he says, especially his mother’s enchiladas, have motivated him to start cooking for himself.”

Living with parents as an adult isn’t something that people tend to aspire to, but the pandemic showed that having the opportunity was usually a blessing rather than a curse.

Following a recession, we often experience what’s known as a ‘K-shaped economy’, which sees certain parts of the economy grow while others follow a downward trend.

Not only can we see this trend in the differences between families and their privileges, it has been felt across businesses too. Collaboration tools, home gym equipment and food delivery services thrived while fashion and wedding businesses suffered.

Financial education from school to retirement

Although for many families financial education can begin in the home, we need schools and universities to intervene. We also need to find a way to reach older generations who might be lacking valuable money management skills through no fault of their own.

We already know that financial education works. It can influence the choices students make at university, their attitude to credit and how much they engage with their pensions. It can equip homebuyers and those approaching retirement with the knowledge required to avoid bad deals and unsuitable financial products.

Following the 2007–2008 financial crisis, lenders faced pressure to tighten their criteria to protect borrowers from mortgage deals that could become unaffordable.

Worryingly, 100% mortgages are creeping back onto the market and a growing number of first-time-buyer schemes are offering complicated alternatives to traditional home loans.

We need to ensure that borrowers know what they’re signing up for.

Just this week June Felix , global chief executive of IG Group, of wrote in the FT about the need to close the gaps in financial knowledge through collective action to bring financial education to all and embedding financial literacy into their ESG strategies. I couldn’t agree more — I have long said that financial literacy is not a charitable pursuit — it’s a strategic necessity!

Making financial choices easier

Then we have the pension crisis which is nothing short of depressing. Older generations were able to build a sizable pension pot without having to think too much about it. All they had to do was go to work each day. Behind the scenes, their retirement savings would grow over time with the help of tax-relief and generous employer contributions.

Nowadays, it’s hard to save enough for retirement without being proactive about it.

When faced with other financial responsibilities such as saving a deposit, student debt repayments and credit card bills, it’s easy for pension contributions to fall down the list of priorities.

With current and savings accounts paying little to no interest, many feel discouraged from saving. As a result, there’s no shortage of people falling victim to trading and investment scams which promise more rewarding alternatives to low interest bank accounts.

It shouldn’t take a crisis as big as a global pandemic for people to learn about money, but perhaps the severity of the situation could be a catalyst for further change.

This is a turning point and an opportunity to equip future generations with the financial knowledge required to protect their families and commit to wealth building for the future.