A survey on Teens & Personal Finance in February 2022 revealed that 54 percent of teenagers felt unprepared for financial lessons they hope to gain as adults. Interestingly, 69 percent also indicated that the high costs of tertiary education had affected their decisions about further studies. In fact, 41 percent of respondents reported that they had not received any education on financial literacy in school. This prompts the question, what vital financial lessons can young adults learn at this juncture of their life?
There are various financial topics you could discuss with your teens, but being overly comprehensive could lead them to lose interest. It’s beneficial to focus on essential financial lessons to captivate their attention. The following ten topics will effectively initiate that conversation.
BUDGETING
Starting your teen on budgeting early will aid them in managing their money with discretion. You can teach them to monitor their income versus expenses, highlighting the significance of living within their means. Helping them categorize their finances for savings and expenditure will assist them in visualizing their income and comprehend the importance of budgeting, especially when they have a financial goal in mind.
SAVINGS
Foster the habit of saving. Introduce the idea of setting aside a portion of their earnings for savings before expenses. Opening a savings account is a good start, and observing their money grow can be rewarding, particularly when there’s a goal attached.
EMERGENCY FUND
Help your teen understand the necessity of an emergency fund to cover unforeseen expenses like medical emergencies or job loss. An initial target could be as low as $1,000 but aim to accumulate enough to cover three to six months of expenses. This provides financial stability and peace of mind.
INVESTING
Educate them about basic investing principles. Discuss different investment vehicles like stocks, bonds, and mutual funds. Teach them about compound interest and long-term financial growth. Encourage self-learning through books, classes, or webinars.
DEBT MANAGEMENT
Discuss the risks and obligations tied to borrowing money. Teach them about credit cards, interest rates, and the need for timely bill payments to avoid debt. Good debt management should start early, considering many people struggle with credit card debt.
CREDIT SCORE
Make them understand that their credit score affects different aspects of their life, like renting, buying a house, or car. Discussing your credit score with them and explaining the difference between a ‘good’ and ‘bad’ score will equip them better for the future.
NEEDS VS. WANTS
Guide your teenagers to discern between needs (fundamental expenses) and wants (luxuries). Motivate them to prioritise needs over wants, particularly since peer pressure can influence their purchasing decisions.
FINANCIAL GOAL SETTING
Establishing financial goals allows teens to work towards something tangible, like saving for a car, college, or vacation. Make sure goals are achievable and quantifiable to keep them motivated.
WORK AND EARNING
Impart a strong work ethic and financial responsibility to your teens. Teach the correlation between effort at work and income. Talk about various job opportunities available to them.
UNDERSTANDING TAXES
Provide beginners’ lessons about financial life practices, including income and sales taxes, and their effects on earnings. Start with the basics about taxes: compulsory contributions to the government for public services such as education, healthcare, infrastructure, etc.
Share the importance of filing taxes and the resultant impacts on overall income.
WHAT ARE SOME OF THE FINANCIAL LIFE LESSONS YOU HAVE TAUGHT YOUR TEENS?
