A Teens & Personal Finance Survey conducted in February 2022 revealed that over half (54%) of the teenager respondents felt ill-equipped for financial realities they’re likely to face in adulthood. A significant 69% indicated that the escalating costs of higher education influenced their decision regarding college attendance. Astoundingly, the research also indicated that 41% of the teenagers were not exposed to any form of financial literacy education in their schools. Considering these findings, it’s crucial to ponder what knowledge can be imparted to the young adults now that might have a lasting impact on their financial well-being and overall life.
Several financial topics are worth discussing with your teenager. However, delving too deep into all of them might cause disinterest. Some key financial principles can be introduced to your teen. Here are ten topics that can be used as a starting point.
BUDGETING
Training your teen in the art of budgeting, regardless of their limited expenses, will enable them to manage their income better. Guide them on how to record income and expenses, highlighting the importance of spending within their budget. Helping them divide their income into various sections like saving and spending can provide them a visual understanding of managing finances, especially if they have a financial objective in mind.
SAVING
Promote the habit of money-saving. Illustrate the idea of saving first before spending on anything else. Commencing with a savings account can be an excellent step. The process of depositing money and watching the balance increase can prove exciting for teens, particularly if it is tied to a specific goal.
EMERGENCY FUND
Train your teen in building an emergency fund, which could be a lifesaver during unexpected crisis situations such as a health emergency, job loss, or sudden dip in income. Aim to grow this fund to cover three to six months’ worth of expenses, offering financial protection and reassurance.
INVESTING
Introduce your teen to investing fundamentals. Discuss various investment possibilities like stocks, bonds, and mutual funds. Teach them about compound interest and how it aids in long-term financial growth. Motivate them to educate themselves further by reading books, attending classes, or registering for webinars related to investment.
DEBT MANAGEMENT
Talk about the potential risks and obligations that come with borrowing money. Educate them about credit cards, interest rates and the importance of timely bill payments to prevent debt accumulation.
CREDIT SCORE
Educate your teenager about credit score and how it impacts various aspects of their future, such as renting an apartment, securing a home loan, or buying a car. Establishing an open conversation about your credit score and means to improve it is important.
NEEDS VS. WANTS
Help your teens identify the difference between needs (essential expenses) and wants (luxuries). Encourage them to prioritize needs over desires. A transparent conversation about wants and needs can guide their spending habits correctly.
FINANCIAL GOAL SETTING
Encourage your teens to set financial goals. It can motivate them to save for something specific, such as a car, college fees, or a vacation.
WORK AND EARNING
Help teens grasp the concept of earning through work. Establish the value of hard work and financial responsibility early on. Discuss various job opportunities and the coherence of effort and income.
UNDERSTANDING TAXES
Provide them a basic understanding of taxes, including income and sales taxes. Teach them about mandatory tax contributions for public services like healthcare, education, and infrastructure. Explain how taxes affect their overall earnings.
What are the practical financial lessons that you’ve taught your teenagers?
