Results from a survey conducted in Teens & Personal Finance Survey in February 2022 revealed that over half (54 percent) of teens felt inadequately prepared to manage financial responsibilities as adults, with a significant 69 percent acknowledging the rising cost of higher education influencing their decision to pursue college. Shockingly, more than four out of ten participants (41 percent) stated that their schools didn’t provide any financial literacy education.
Given these figures, it becomes crucial to consider what early financial knowledge we can impart to our youngsters to secure their future. Several key financial concepts can be discussed with your teens. However, it’s important to maintain their enthusiasm without overwhelming them with too much information. Here, we list ten financial topics that could be a great starting point for these conversations:
1. BUDGETING: Encourage your teens to budget, even if their expenses are limited. Show them how to keep track of income and expenditures, emphasizing the importance of living within their means. Keeping tabs on the money they spend will encourage them to take better care of their finances, particularly when working towards a financial goal.
2. SAVINGS: Foster a culture of savings. Explain the idea of reserving a portion of their income for savings before splurging on other things. Having a savings account and watching the amount in it grow can be a thrilling experience for teens, especially when tied to a particular goal.
3. EMERGENCY FUND: Instruct your teen about creating an emergency fund, which comes in handy during unforeseen circumstances like a sudden job loss or health crisis. The comfort of having financial security and peace of mind is priceless.
4. INVESTING: Guide them through basic investment principles. Investing isn’t just about stocks, bonds, and mutual funds. It’s also about appreciating the magic of compound interest and long-term financial growth. Make sure that you simplify these concepts for them to comprehend easily.
5. DEBT MANAGEMENT: Talk to your teen about the potential risks and responsibilities that come along with borrowing money. Discuss interest rates and the importance of timely bill payment to prevent substantial debt.
6. CREDIT SCORE: Explain the importance of a healthy credit score which starts to build earlier than most people realize. Make your teen understand how it impacts various aspects of their life, including renting an apartment or buying a home.
7. NEEDS VS WANTS: Assist them in distinguishing between essentials (needs) and luxuries (wants). Encourage them to understand the influence of their peers on their buying decisions and help them prioritize their needs over wants.
8. FINANCIAL GOAL SETTING: Encourage them to set financial goals. Whether big or small, helping them to work towards a financial goal provides clear and motivating objectives to start their financial journey.
9. WORK AND EARNING: Teach your teenagers about the importance of a strong work ethic, making them earn their own money. Explain how income is generated and elucidate the link between effort and income.
10. UNDERSTANDING TAXES: Give them a fundamental understanding of how taxes impact their income. Start with the basic concept – a mandatory contribution to the government supporting public services.
Ensure that your teenager is educated about these financial life lessons early as it lays the foundation for their financial security and a future without financial uncertainties.
