We’ve heard from many parents that living in high socio-economic circles ensure their offspring are smarter about financial issues.
While this may be true in many cases about some financial issues, after working closely with almost 15,000 kids and young adults at all socio-economic levels, we’ve discovered some fascinating insights.
Through firsthand observation of youth in hundreds of classes across diverse communities, we’ve seen one constant behaviour. This persistent behaviour when it comes to money—how to use it; what to spend it on; how to invest it—is strongly peer-led and dictated through confirmation bias.
Now, if you’re a financial advisor, investment regulator or bankruptcy specialist, you’re going to say this also holds true for grown-ups.
However, let’s ponder this for a moment. Research shows that the majority of our youth are getting a failing grade in financial capabilities, and have been for more than a decade (when measures began in earnest). So, if youth over the past decade (at least) have been learning about money like we did about sex in the ‘60s, they’re destined for a few surprises. Does this explain why affinity fraud is so effective? And it begs the question, is the propensity for peer-led confirmation bias baked in at a young age?
We’ve seen that youth in all communities are vulnerable to over-spending and keeping their money safe, for differing reasons—with the exception of peer-led influences. Unfortunately, this persistent behaviour is often outside of a teacher’s purview. Also many nuanced aspects are out of parents’ reach. We know that busy parents are challenged by time-demands along with keeping up to the sparkly objects that are demanding their kids attention. We’ve seen that, while some of these kids are dipping their toes into investments when they don’t have a handle on the basics. Unfortunately, unlike some of their street-smarter, lower-income peers, many of them fall prey to the special-snowflake lure—without question. And once group-think takes hold—watch out.
The bottom line—we’ve seen firsthand that all ages and from all walks of life can be taken in—if the hook is dangled at just the right angle.