The Teens & Personal Finance Survey conducted in February 2022 revealed that 54 percent of the participating teenagers felt insufficiently equipped for adult financial responsibilities. A significant 69 percent admitted that the escalating costs of college education influenced their decision to enroll or not. It was also found that 41 percent of the teenagers were not designed any financial literacy education in their academics, raising questions about how they can learn necessary lessons that affect their financial stability and life in general.
Taking note of these details, parents can incorporate various financial-related themes into their conversation with teens, without overwhelming them with too much information. Here are ten main points to help initiate this discussion:
1. BUDGETING
Even when there are no major expenses on their end, introducing teenagers to budgeting will encourage careful money management. You can show them how to track their earnings and spending, emphasizing the significance of living within their financial capacity.
2. SAVING
Promote the practice of saving money. Show your teen the essence of setting aside some amount from their income before making purchases. The process of saving can be initiated by opening a savings account and watching the balance increase over time.
3. EMERGENCY FUND
Illustrate the importance of an emergency fund to your teen. This fund can assist with bills during unforeseen circumstances like medical emergencies, job loss, or income reduction.
4. INVESTING
Introduce basic investment concepts to your teenager. Discuss investment modalities such as stocks, bonds and mutual funds, and emphasize the magic of compound interest and long-term financial growth.
5. DEBT MANAGEMENT
Explain the implications of borrowing money and educate them about credit card utilization, interest rates, and the need for timely payment of bills.
6. CREDIT SCORE
Teach your child about credit scores, accounting for their impact on different aspects like house or car acquisition, renting an apartment, etc.
7. NEEDS VS. WANTS
Show your teenager how to distinguish between essential needs and luxury wants. Encouraging them to prioritize needs will foster responsible spending habits.
8. FINANCIAL GOAL SETTING
Developing financial goals will motivate them to work towards something. Goals can be either in the near or distant future such as saving for a car, college, or holiday.
9. WORK AND EARNING
Educating a teenager about job culture and income is a key component of their financial literacy. It’s imperative to instill a dedicated work ethic and financial responsibility from an early age.
10. UNDERSTANDING TAXES
Furnish them with basic information about taxes, enabling them to comprehend their significance in life and how they affect personal finances.
Finally, maintain an open dialogue with your teens about your own financial experiences, victories, and even mistakes, which can serve as practical examples of the financial lessons you teach them.
