The results of a Teens & Personal Finance Survey conducted in February 2022 revealed that over half (54%) of teenage participants felt ill-equipped for the financial responsibilities of adulthood. Almost 70% indicated their college education decisions were influenced by escalating tuition costs. The study also highlighted that 41% of these teenagers were not receiving any school-based education around financial literacy. One might wonder what significant financial skills young adults should acquire to improve their future finances and life in general.
Open discussions on financial matters with your teenager can be valuable. However, if you attempt to make them master all these topics at once, they could lose interest. Here are some elementary financial topics you could discuss with your teen.
1. BUDGETING: Even if your teenager doesn’t have many outgoings, instilling a habit of budgeting can encourage responsible money management. Teach them to monitor income and expenses, underlining the importance of living within their financial means.
2. SAVING: The habit of saving money should be encouraged. Explain the concept of ‘paying yourself first’ by putting aside a percentage of their income into savings before other expenditures.
3. EMERGENCY FUNDS: Teach your teenager the importance of having an emergency fund for unexpected events such as a medical crisis or job loss. Aim to save up to three to six months’ worth of expenses in a high-yield savings account.
4. INVESTING: Educate them about the basics of investing, including options like stocks, bonds, and mutual funds. Stress the benefits of compound interest and long-term financial growth.
5. DEBT MANAGEMENT: Make them understand risks and responsibilities related to borrowing money, and stress the importance of timely bill payments to prevent debt accumulation.
6. CREDIT SCORE: Teach your teenager what a credit score is and how it can influence various aspects of their life like renting apartments, buying a car, or a purchasing a house.
7. NECESSITIES VS. LUXURIES: Help your teenager distinguish between necessary and non-essential expenses. Encourage them to prioritize necessities over luxuries and make sensible purchasing decisions.
8. FINANCIAL GOAL SETTING: Encourage your teenager to set financial goals, which could be short or long-term, such as saving for a car, tuition, or a trip.
9. WORK AND EARNING: Address the topic of work and earnings to impart a strong work ethic and pave the way for personal development.
10. UNDERSTANDING TAXES: Offer them an overview of income and sales taxes, and explain how these taxes reduce their paycheck.
WHAT FINANCIAL LIFE SKILLS HAVE YOU TAUGHT YOUR TEENAGER?
