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The results of a survey on Teens & Personal Finance conducted in February 2022 tells an interesting story. Over half (54 percent) of the surveyed teenagers indicated feeling unprepared for adult financial decisions. Additionally, 69 percent of respondents admitted that escalating higher education costs affected their decision about attending college. It was found that 41 percent of these teenagers do not receive any financial literacy education at school, thus raising questions about the financial knowledge they will carry into adulthood.
There are various financial topics to discuss with teenagers. But maintaining their interest is important, and covering basic principles is advisable rather than delving deep into all topics. There are ten critical financial facets that can spark effective conversations with teenagers.
BUDGETING
Teaching your teen about budgeting can help them manage their money better. You can guide them on how to monitor their income and expenditure, and stress living within their means.
SAVINGS
Get your teenager into the habit of saving. Teach them to set aside a part of their income before any expenditures. Starting a savings account can make this more tangible, as they can watch their savings grow over time, especially if they have a specific savings goal.
EMERGENCY FUND
Encourage your teenager to set up an emergency fund. These funds can cover unexpected expenses such as medical emergencies or job loss. The goal should be to build up to three to six months of expenses in this fund.
INVESTING
Guide your teen through the basic principles of investing, discussing stocks, bonds, mutual funds and the benefits of compound interest and long-term financial growth.
DEBT MANAGEMENT
Educate your teen about the risks and responsibilities tied to credit card usage and borrowing money. Leading them to understand the necessity for timely payments prevents debt accumulation and teaches them about consequences.
CREDIT SCORE
Prepare your teen by explaining what credit scores are and their potential influence on future large-scale purchases, such as a house or car. Open-up discussions about your credit score, ways to check it, and what constitutes a good score.
NEEDS VS. WANTS
Help your teen to differentiate between needs (essentials like food, shelter, clothing) and wants (luxury or non-essential items). This understanding can guide them in managing their money better.
FINANCIAL GOAL SETTING
Encourage your teen to set financial goals, such as saving for a car, college, or a vacation. Goals provide a clear aim and often the motivation to start a financial journey.
WORK AND EARNING
Improving their understanding of work, earning, and financial responsibility is critical. Teach them about different job opportunities and the correlation between hard work and income.
UNDERSTANDING TAXES
Provide them with basic knowledge of taxes, including income tax, sales tax, and how they affect their finances. Explain what taxes are, why they’re important, and how to file them, leading them to a better understanding of their overall earnings.
Share with us some of the financial lessons you’ve provided to your teens.
