The Teens & Personal Finance Survey conducted in February 2022 suggested that over half (54 percent) of the participating teens felt inadequately equipped for dealing with financial matters in adulthood. The escalating expenses of higher education, as stated by 69 percent of respondents, influenced their decision about pursuing further education.
Surprisingly, the study revealed that around 41 percent of the teens participating hadn’t received any financial literacy education in school. This raises questions about what financial learning interventions could be effective for adolescents.
While there are numerous financial topics to discuss with your teens, overwhelming them with all of them may lead to disinterest. Therefore, we’ve compiled a list of ten crucial financial principles to assist you in sparking an engaging conversation with them.
1. BUDGETING: Encouraging your teens to regularly budget, even if they have minimal expenses, is crucial. Demonstrating how to track incoming and outgoing money, whilst underlining the significance of living within their means, can beneficial.
2. SAVING: Promote a saving mindset and illustrate the self-rewarding procedure of setting apart a part of their income prior to making any purchases. Introducing them to saving accounts can make saving an exciting task, especially with a particular goal in sight.
3. EMERGENCY FUNDS: Show them the importance of setting up an emergency fund and how it can act as a safety net when dealing unexpectedly with medical emergencies, job loss, or a dip in income.
4. INVESTING: Familiarize them with the fundamentals of investments including bonds, stocks, and mutual funds and the potential of compound interest and long-term growth.
5. DEBT MANAGEMENT: Inform them about the associated risks and responsibilities of borrowing money and the importance of timely payments to avoid the piles of debt.
6. CREDIT SCORE: Early acquaintances with credit score and its potential influence on various aspects of their lives, such as house buying or car purchasing, can be beneficial for their future.
7. PRIORITIZING NEEDS OVER WANTS: Teach your teenager to identify essential expenses (needs) versus luxury, non-essential items (wants).
8. FINANCIAL GOAL SETTING: Encouraging teens to set financial goals can give them motivation and direction.
9. WORK AND EARNING: It’s important to instill hard work values and responsibilities of earning money from an early age and get them to grasp the correlations between effort and income.
10. UNDERSTANDING TAXES: Introduce them to various taxes and how they impact earnings. Explain about income and sales taxes and detailed deductions like Social Security and Medicare.
Teaching your teens these financial life lessons can have a meaningful impact on their lives.
