In a recent survey on Teens & Personal Finance conducted in February 2022, it was revealed that 54% of the responding teenagers felt ill-equipped when it came to money management skills for their forthcoming adult life. The ever-increasing costs of higher education influenced the decision to pursue college education for 69% of the participants. Furthermore, an alarming 41% reported that they were not given any formal financial education in their school curriculum. This prompts the question- what financial enlightenment can we offer the younger generation to empower them in their lives and financial journeys.
There are myriad money-related topics to explore with your teenager. However, bombarding them with too much information at once might lead to disinterest. It’s better to stick to the basics. The following are ten financial aspects crucial for engaging and enlightening conversations.
1. BUDGETING:
Establish the habit of budgeting in your teenager, irrespective of their minimal expenses. Demonstrate the process of documenting income and costs, underscoring the significance of living according to their means.
2. SAVING:
Motivate them to become habitual savers. Walk them through the concept of setting aside a percentage of their earnings for savings, prioritizing it over other expenditures.
3. EMERGENCY FUND:
Explain the necessity of an emergency fund to cater for unexpected expenses like medical bills, job or income loss. Advise them to aim for a fund that holds nearly three to six months of their expenses.
4. INVESTING:
Introduce the idea of investing and discuss varying options from stocks to mutual funds. Elucidate the idea of compound interest and the potential of long-term growth.
5. DEBT MANAGEMENT:
Educate them on the implications and duties associated with borrowing money. Discuss the concepts of credit cards, interest rates, and the essentiality of punctual bill payments.
6. CREDIT SCORE:
Inform your teen about a credit score, how it starts accruing earlier than they might expect, and its long-term impacts like qualifying for rent, a mortgage, or an automotive loan.
7. NEEDS VS. WANTS:
Enable them to differentiate between essential expenses and luxury items. Stress the importance of prioritizing needs over wants.
8. FINANCIAL GOAL SETTING:
Promote the establishment of financial goals, whether immediate or distant. This can boost their drive to start their financial journey.
9. WORK AND EARNING:
Impart the correlation between input and outcome in the workplace. Encourage a strong work ethic and financial accountability.
10. UNDERSTANDING TAXES:
Provide them basic knowledge of income and sales taxes, and their impact on their overall income.
Engaging in open discussions with your teen about these critical financial aspects will prepare them for a financially literate adulthood.
Do you have any crucial financial lessons to share that you’ve taught your teenagers?
[Source: SmartAsset.com]
