In a study on teenagers and their understanding of finances conducted in February 2022, it was found that over half (54 percent) of the participating teenagers felt ill-equipped to handle adult financial responsibilities. Most of them (69 percent) expressed that the increasing expenses of higher education had influenced their decision to pursue college.
The survey further revealed that over two-fifths (41 percent) of the teenagers hadn’t received any financial education in school. This prompts the query on what essential lessons teenagers could presently grasp that would positively affect their financial future.
There are many important financial topics for discussion, but emphasis on every subject might cause disinterest. Consequently, we have curated a list of ten fundamental lessons to guide your conversation.
BUDGETING
Teach your teenager to budget regardless of the size of their expenses. Inculcating budgeting habits will aid prudent spending and financial management. Demonstrating income and expense tracking and the significance of maintaining their means is quite essential.
Categorizing their income into various components such as savings and expenses will encourage responsible spending, especially when they are saving towards a specific financial goal.
SAVING
Promote the habit of reserving a portion of income for savings. Explain the principle of self-payment and how it works. Opening a savings account would be a suitable step forward.
EMERGENCY FUND
Enlighten your teenager on the necessity of having an emergency fund. Such funds can be very useful in the event of unforeseen financial difficulties like medical emergencies, job loss, or a decrease in income. This safety net can provide financial stability and peace of mind.
INVESTING
Incorporate the concept of investing. Discuss various investment plans like bonds, stocks, and mutual funds. Educate them on the benefit of compound interest and the advantages of long-term financial growth.
DEBT MANAGEMENT
Explain the risks and accountability associated with borrowing money. Familiarize teens with credit cards, interest rates, and the importance of timely bill payment to avoid debt.
CREDIT SCORE
Acquaint them with the concept of a credit score. Discuss how credit scores can influence aspects of their life such as buying a house, renting an apartment, or buying a car.
NEEDS VS. WANTS
Showcase the contrast between necessities (like food, clothing, and shelter) and wants (luxury and non-essential items). Encourage them to prioritize necessities over wants and not to get carried away by peer pressure.
FINANCIAL GOAL SETTING
Motivate teenagers to set financial goals. Help them understand how setting reachable and measurable financial objectives can motivate them.
WORK AND EARNING
Educate your teenager about work values and earnings. Stress the importance of hard work and the connection between effort and income.
UNDERSTANDING TAXES
Provide a fundamental understanding of taxes. Illustrate how taxes work and how they impact income. Discuss the significance of tax filing and how it affects overall earnings.
WHAT ARE SOME OF THE FINANCIAL LIFE LESSONS YOU HAVE TAUGHT YOUR TEENS?
