In a Teens and Personal Finance survey conducted in February 2022, it was revealed that 54% of the participating teenagers felt inadequately prepared to handle the financial challenges expected in adulthood. Of these, 69% admitted that the rising costs of higher education influenced their decision to pursue further studies. Unfortunately, the study confirmed that 41% of teens receive no financial education in their schools. As such, young adults must acquire practical knowledge that influences their financial decisions positively.
Several finance-related topics can pique a teen’s interest, but an attempt to make them proficient in all might cause them to lose interest. Here are some essential finance lessons for teens:
1. Budgeting: Familiarising teens with budgeting practices can go a long way in helping them responsibly manage their money. The exercise of categorisation of their funds – savings and spending – can give them a clear understanding of their financial situation.
2. Saving: Regular saving should be encouraged. It’s important to instill in them that they should prioritize setting aside a portion of their earnings into savings before spending on other things. Opening a savings account can offer invaluable knowledge and experience.
3. Emergency Fund: Empower your teen by teaching them to establish an emergency fund. This can provide financial cushioning in case of medical emergencies or sudden loss of income.
4. Investing: A basic introduction to different investment options including stocks, bonds, and mutual funds can provide them a head start. The lessons should also impart knowledge about compound interest and long-term financial growth.
5. Debt Management: Make your teen understand the risks and responsibilities of borrowing money, using credit cards, paying off the interest rates, and avoiding debt accumulation.
6. Credit Score: Bring your teenager’s attention to the concept of credit score, how it builds, and its importance in transactions like renting an apartment or buying a house or car.
7. Needs vs. Wants: Guide your teen in discerning essential expenses from luxury items. A clear distinction in this area is key to avoid unnecessary financial stress.
8. Financial Goal Setting: Encourage setting financial goals. This allows teens to have something to work towards, be it short-term or long-term.
9. Work and Earning: Teaching about work ethics and earning money goes hand in hand with their financial education. This not only guides them towards economic independence but also inculcates a sense of responsibility.
10. Understanding Taxes: A basic lesson in income taxes, sales taxes, and how they impact earnings can prove useful in the long run. They should understand these mandatory contributions towards the nation.
So, what are some of the financial life lessons you taught your teens?
Source: Smartasset.com
