Findings from a Teens & Personal Finance Survey conducted in February 2022 point to a significant gap in financial literacy among young adults. The study revealed that 54% of the participating teenagers felt inadequately equipped to handle financial responsibilities typically held by adults. With escalating academic costs, 69% feel their college choices are directly affected. Additionally, the report showed a worrying 41% have not been offered any form of financial education in their schooling.
It then becomes pertinent to consider how we could enhance their knowledge base from now on to prepare them for the future. To keep the teens engaged, it is not advisable to overload them with information, but focus instead on few basic, but vital, financial topics. Below, we outline ten such areas for you to introduce to your teen.
BUDGETING
Teaching your teen to budget is an essential life skill. Demonstrate how to keep track of earnings and outgoings, stressing the need to live within one’s means. Illustrating the process of dividing money into distinct ‘saving’ and ‘spending’ brackets will be extremely beneficial.
SAVING
Impart the value of savings by introducing the concept of setting aside part of their earnings before any expenditure. Commencing this process through a savings account can make the experience more tangible, and interesting, especially when savings work towards a particular goal.
EMERGENCY FUND
Encourage your teen to establish an emergency fund. This habit can prove useful during unexpected scenarios such as medical emergencies, unemployment, or sudden income reduction. Building a sizeable fund equivalent to 3-6 months of expenses offers an added layer of financial security.
INVESTING
Present them with a primer on investments, touching upon stocks, bonds and mutual funds. Discuss the dynamics of compound interest and long-term wealth accumulation, which could be augmented through further studies, books or webinars.
DEBT MANAGEMENT
Educate them on the pros and cons of borrowing, particularly using credit cards. Emphasize the importance of punctuality in debt repayment and associated penalties.
CREDIT SCORES
The significance of credit scores should not be overlooked. By preparing the teens early, they better understand its impact on future endeavors such as property rentals, house buying, and car purchasing.
NEEDS VS. WANTS
Teens should be guided on how to differentiate between needs and wants. Conversations around peer pressure and distinguishing luxuries from essentials can help them make improved financial decisions.
FINANCIAL GOALS
Setting achievable and quantifiable financial goals can keep teens motivated on their fiscal journey.
WORK & EARNING
Understanding work and the relation between effort and income is crucial. Strive to instill a robust work ethic in them early on.
TAXATION
Starting with the basic lessons about types of taxes and their implications on earnings could prove enlightening for teens, helping them better understand the financial world they will soon be a part of.
Share your experiences and thoughts on this; have you initiated similar financial conversations with your teenagers?
