The Teens & Personal Finance Survey conducted in February 2022 revealed an unpreparedness in teenagers regarding financial management, with 54 percent of respondents feeling inadequately equipped with financial life skills necessary for adulthood. Moreover, 69 percent admitted that soaring higher education expenses have influenced their decision to pursue college.
Interestingly, the survey also unveiled that 41 percent of teens are not being taught financial literacy in schools. Hence, it’s worth considering life skills and financial lessons that we can teach today’s youth which can reflect positively on their future.
There are many aspects of finance that can be introduced to your teen. However, bombarding them with too much information all at once could disinterest them. It’s best to take it slow, starting with some essential financial lessons. Here are ten suggested topics to kick off discussions.
BUDGETING
Even if your teen’s financial responsibilities are modest at present, embedding a habit of budgeting from an early age will benefit their monetary management in the future. Illustrate how income and expenses are tracked, emphasizing the necessity of living within their limits.
Categorizing their money into segments like savings and expenditure can help them visualize their expenses, promoting better understanding, especially when they have specific financial goals.
SAVING
Foster a saving habit. Clarify the idea behind paying oneself first, which means setting aside money for savings before splurging on other things. Opening a saving account can be a good starting point where consistently saving and seeing the amount rise can be satisfying, particularly when there’s a financial goal involved.
EMERGENCY FUND
Encourage your teen to build an emergency fund which can cover unexpected expenses such as medical costs, job loss, or sudden income reduction. The initial amount can be as modest as $1,000, eventually aiming for three to six months’ worth of expenditure stored in a high-yield savings account for financial security.
INVESTING
Introduce basic investing concepts. Discuss investment avenues like stocks, bonds, and mutual funds. Educate them about the advantages of compound interest and financial growth over the long term. Inspire them to learn more through books, classes, or webinars on investing.
DEBT MANAGEMENT
Discuss the potential risks and responsibilities relevant to borrowing money. Enlighten them about credit cards, interest rates, and the importance of timely bill payment to sidestep accumulating debt.
CREDIT SCORE
Inform your teen about credit scores and the lasting effect they have on significant life aspects, like renting a house, buying a car, or securing a mortgage. Engage in an open discussion about the meaning behind credit scores and how to improve them.
NEEDS VS. WANTS
Help your teens distinguish between necessities such as food, shelter, and clothing, and luxuries or non-essentials. Encourage prioritizing needs over wants. Peer pressure may often confuse youngsters’ perception of needs and wants, so it’s important to guide them in making wise choices.
FINANCIAL GOAL SETTING
Setting financial goals can be a powerful motivator for teens. Make goals achievable and measurable, whether they’re short or long-term, like saving for a car, college, or a vacation.
WORK AND EARNING
Teach your teenager about earning through work as a significant aspect of their financial education and personal growth. Emphasize the importance of a strong work ethic and financial responsibility, illustrating the connection between hard work and income.
UNDERSTANDING TAXES
Begin with a basic understanding of taxes as mandatory contributions to the government, serving to fund public utilities like education, healthcare, and infrastructure. Explain income taxes, sales taxes, and other paycheck deductions to your teens and the role they play in individual earnings.
