The survey on “Teens & Personal Finance” carried out in February 2022 revealed an interesting fact – more than half (54%) of the young respondents felt ill-equipped for money management in their adult life. The increasing cost of higher education was cited by the majority (69%) as a concern affecting their choice to attend college. Alarming was the fact that more than four out of ten teenagers (41%) acknowledged that they did not receive any formal financial education at school.
Given these facts, it is imperative to ponder on the key financial concepts that our youth needs to master that would significantly influence their monetary stability in the future. Here are ten critical financial topics, simplified to hold the interest of the youngsters and to start a dialogue:
1. BUDGETING
Ensure your teenager understands the importance of efficient budget management even with minimum expenses. They should be fully aware of their earnings and expenses – teaching them the significance of living within their resources.
2. SAVING
Teens must also learn the importance of building savings habits early. Explain the concept of setting aside a fraction of their earnings for savings before spending it.
3. EMERGENCY FUND
Stressing the importance of an emergency fund, explain the provision this added financial safeguard provides during unforeseen circumstances such as a sudden job loss or medical emergency.
4. INVESTING
Investment basics are a crucial part of financial literacy. They should have a simple understanding of different investment options and the potential of compound interest for long-term financial growth.
5. DEBT MANAGEMENT
Managing and understanding debt is a valuable lesson. Reinforce the importance of timely payment of their bills to avoid falling into debt, stressing the responsibilities of credit card usage.
6. CREDIT SCORE
Discuss credit scores, their implications – like how they impact their prospects of renting or buying a house, and their correlation with financial habits.
7. NEEDS VS. WANTS
Help your teenager prioritize essential needs over non-essential wants, and explain the significant financial implications of doing so.
8. FINANCIAL GOAL SETTING
Goal setting is an excellent exercise that fosters financial discipline. Encourage them to identify both short-term and long-term goals.
9. WORK AND EARNING
Instill the value of hard work and earning money. Discuss various job prospects and enlighten them about the relationship between effort and reward.
10. UNDERSTANDING TAXES
Teach your teen about income and sales taxes and other deductions, illuminating their impact on overall earnings.
These are some of the vital financial management knowledge nuggets that should be passed down to our teens to prepare them better for their future financial responsibilities. Remember, the earlier we start, the better their understanding will be.
