The results of a Teens & Personal Finance Survey conducted in February 2022 revealed fascinating insights. Notably, 54% of the teenage participants disclosed feeling inadequately equipped with financial knowledge for their prospective adult life. Furthermore, the escalating costs of higher education had a significant influence on 69% of the responders’ decision to pursue higher academic qualifications.
Curiously, the survey discovered that roughly 41% of teenage participants were yet to receive any education on financial literacy in schools. This finding casts attention on the important financial lessons that you can impart to young adults, significantly influencing their future financial scenarios and life situations.
While considering numerous financial aspects is essential, burdening your teenager with all can potentially lead to indifference. However, a couple of primary financial lessons are beneficial to your teenager. To kick start productive dialogue, we present ten notable topics.
BUDGETING
Instilling a habit of budgeting in teenagers, irrespective of their financial obligations, helps them manage their income with discretion. You can demonstrate how to balance income and expenditure and highlight the importance of budgeting to ensure they accord well with their financial capability.
By dividing their income into categories like savings and spending, teenagers gain a clearer understanding of the necessity of financial organization. This is particularly vital when working towards a financial goal.
SAVING
Promote consistent money-saving habits. Illuminate the idea of assigning a portion of their income into savings before indulging in any spending. Introducing teenagers to savings accounts is a fruitful way to kick start their saving process. Witnessing the gradual increase of their savings fosters enthusiasm, especially when it’s aligned towards a specific goal.
EMERGENCY FUND
Educate your teenager on the importance of establishing an emergency fund. This reserve is beneficial during unexpected financial scenarios such as job loss or medical emergencies. An ideal emergency fund commences from as little as $1,000. However, the ultimate objective is to increment to an equivalent of three to six months of your expenditure and maintain this amount in a high-yield savings account.
INVESTING
Acquaint your teen with crucial investing principles. Explore the varied investment avenues such as stocks, bonds and mutual funds. Explain core investment concepts like compound interest and long-term financial growth. Urge them to expand their knowledge through books, courses and webinars.
DEBT MANAGEMENT
Outline the risks and implications tied to money borrowing. Impart knowledge regarding credit cards, interest rates and the importance of timely bill payments to prevent debt accumulation.
CREDIT SCORE
Inform your teen about the significance of a credit score. Explain how it influences various aspects of one’s life such as leasing an apartment, buying a house or a car.
NEEDS VS. WANTS
Teach your teenager the distinction between necessities and desires. Encourage them to prioritize essential costs such as food, accommodation, and clothes, focusing less on luxuries and non-essential items.
FINANCIAL GOAL SETTING
Setting financial goals is a beneficial practice that inspires teenagers to save and control their money. Having set targets to achieve can motivate these young adults to begin their journey of financial management.
WORK AND EARNING
Ensure your teenager understands the correlation between effort and income. Highlight the importance of hard work and earning money. Introduce them to various employment opportunities to advance their financial management skills.
UNDERSTANDING TAXES
Familiarize your teenager with the basics of taxes including income taxes, sales taxes, and how they impact their overall income. Explain the importance of timely tax filings and how it impacts total earnings.
Financial literacy is a valuable gift for your teenager, equipping them to make informed decisions throughout their life.
