A February 2022 survey on teens and financial understanding revealed that over half of the participants (54%) felt ill-equipped for the financial realities of adulthood. It was also found that increasing college expenses influenced the decision of 69% of respondents concerning further education. Interestingly, the study showed 41% of teens were not being taught financial literacy in schools, raising questions about the types of financial knowledge young adults need to lead successful lives.
There are myriad financial topics you can discuss with your teen. However, attempting to make them proficient in all could lead to a loss of interest. Instead, focus on some fundamental lessons from these ten topics that could initiate constructive conversation:
1. BUDGETING: Familiarize your teen with budgeting, an indispensable habit, regardless of the amount they have to manage. Teach them income and expense tracking and the significance of living within their means. This routine can give them a clearer understanding of savings and spending priorities, especially when they have a financial objective.
2. SAVING: Motivate your teens to save by stressing the concept of paying themselves first. Encourage them to put aside a percent of their income towards savings before spending elsewhere. Starting a savings account can be a rewarding step, especially when there’s a goal in sight.
3. EMERGENCY FUND: Educating your teen about setting up an emergency fund is vital. Such funds can cover unexpected expenses like medical emergencies, job loss, or income reduction, thus offering financial security and peace of mind.
4. INVESTING: Explain the basics of investing, including options like stocks, bonds, and mutual funds. Help them comprehend the concept of compound interest and long-term financial growth.
5. DEBT MANAGEMENT: Inform your teen about the risks and responsibilities of borrowing money. Discuss credit cards, interest rates, and the significance of punctual bill payments to prevent debt accumulation.
6. CREDIT SCORE: Explain the relevance of a credit score. Make them understand how credit scores can impact key aspects of life, such as housing rent, car purchase, or buying a home.
7. NEEDS VS WANTS: Help your teen differentiate between essential expenses (needs) and optional expenditures (wants). Encourage them to prioritize needs over wants.
8. FINANCIAL GOAL SETTING: Familiarize teens with financial goal setting. Goals can motivate them to save, whether for immediate or future needs, like buying a car, funding education, or planning a holiday.
9. WORK AND EARNING: Discussing work and earning is crucial for a teen’s financial education and self-growth. Teach them about various job opportunities and the correlation between effort and income.
10. UNDERSTANDING TAXES: Provide basic knowledge about the financial lesson on taxes, which includes income and sales taxes, and their impact on finances. Begin with simple definitions and move on to their importance on overall earnings.
In conclusion, holding occasional financial discussions and providing crucial financial lessons can immensely benefit your teenage children. What are some of the financial lessons you’ve taught your teens?
