A survey conducted on Teens and Personal Finance in February 2022 found that 54% of the participating teens admitted they felt insufficiently prepared to handle their finances as adults. The escalating cost of higher education has also influenced the college choices of 69% of the respondents.
The study further revealed that only a fraction of the teenagers (41%) are receiving any form of financial education in their schools. This finding underscores the need for parents or guardians to impart financial literacy early on, which can significantly shape their future financial conduct.
The critical question then becomes what financial lessons are important for these young adults to learn? Here we outline ten vital financial discussion points to help you initiate these significant conversations with your teen:
1. Budgeting: Establishing the practice of budgeting early can be beneficial even if your teenager doesn’t have too many expenses yet. Guide them on how to monitor their income and expenditure, stressing on the need to manage money responsibly. Teach them the significance of categorizing their funds for saving and spending, so they grasp the importance of prioritization, especially when they have a specific monetary goal.
2. Saving: Inspire them to save regularly by introducing them to the concept of paying themselves first. This means setting aside some of their earnings for saving before they spend on anything else. Opening a savings account can be an excellent start to this process.
3. Emergency Fund: Show your teen the importance of saving for unforeseen circumstances. This fund will serve as a financial cushion during emergencies such as job loss or unexpected medical bills.
4. Investing: Familiarize your teen with investing basics. Discuss different investment platforms such as stocks, bonds, and mutual funds.
5. Debt Management: Outline the potential risks and responsibilities that come with borrowing money. Explain interest rates, credit cards, and the significance of timely bill payments to prevent debt accumulation.
6. Credit Score: Teach your teenager what credit score entails and how it can greatly impact their future, including renting an apartment, obtaining a mortgage, or buying a vehicle.
7. Needs Vs. Wants: It is crucial for teens to understand the disparities between essential costs (food, shelter, clothing) and non-essential items (luxuries). Encourage them to prioritize their needs over their wants.
8. Financial Goal Setting: Encourage teens to establish financial goals as this could provide a strong motivation for them to start managing their finances judiciously.
9. Work and Earning: Instilling the values of hard work, the importance of earning, and financial responsibility from an early age is crucial.
10. Understanding Taxes: Provide a basic primer on taxes – the different types, what they fund, and their impact on personal finance.
In conclusion, what are some of the financial life wisdom you’ve passed onto your teens?
