A Teens & Personal Finance survey conducted in February 2022 revealed that 54 percent of the participating teenagers felt ill-equipped for managing finances as adults. Furthermore, the skyrocketing costs of tertiary education have influenced the decision to attend college for 69 percent of them.
The survey also pointed out that 41 percent of the teenagers admitted to not receiving any schooling in financial literacy. This raises concerns about the financial knowledge and habits they will carry into adulthood.
There are various money matters you can discuss with your teenager. However, trying to turn them into finance experts overnight might overwhelm or bore them. What’s important is to emphasize the basic lessons. Here are ten financial concepts you can use to spark discussions about money.
BUDGETING
Even if your teen doesn’t have extensive expenses, encouraging them to budget can foster healthy financial habits. Teach them how to keep track of money flows, emphasizing the value of living within their means. Dividing their money into sections, such as savings and spending, helps make their finances more tangible.
SAVINGS
Promote the practice of saving. Introduce them to the idea of paying themselves first by allocating part of their earnings to savings before any other expenses. Having a savings account allows them to see their money grow, which can be motivating, especially with a goal in mind.
EMERGENCY FUND
Show your teen how to set up an emergency fund to help cover unexpected costs such as medical bills, loss of employment, or income reduction. A fund starting from $1,000 can be gradually increased into a sum equivalent to three to six months worth of expense, providing financial security and setting their mind at ease.
INVESTING
Familiarize them with basic investing principles. Discuss various investment vehicles like stocks, bonds, and mutual funds. Educate them about the magic of compound interest and the value of long-term financial growth.
DEBT MANAGEMENT
Inform them of the risks and obligations that come with borrowed money. Teach them how credit cards, interest rates, and on-time bill payments can affect their debt levels.
CREDIT SCORE
Educating your teen about what a credit score is and its impact on their life is a crucial step. Open discussions about your own credit score, ways to check it, and the implications of having good and bad scores can be a good starting point.
NEEDS VS. WANTS
Help your teenagers differentiate between needs and wants. Encourage them to prioritize the essentials over extras as they might mix up the two due to peer influence.
FINANCIAL GOAL SETTING
Encourage setting both short and long-term financial goals. This allows teens to work towards specific targets and can spark their motivation to start their financial journey.
WORK AND EARNING
Teaching your teenager about work and earning is key for their overall growth and financial literacy.
Highlighting the significance of hard work, corresponding income, and different job opportunities can make a significant difference.
UNDERSTANDING TAXES
Introduce them to the concept of taxes. Start with the basics, explaining what taxes are, their purpose, their impact on overall earnings, and the importance of tax filing.
We’d love to hear about the financial tips and lessons you’ve shared with your teens in the comments below.
