In a recent survey on Teens & Personal Finance conducted in February 2022, it was brought to light that more than half of the teenagers surveyed (54 percent) admit to feeling underprepared for upcoming financial challenges in adulthood. The continually increasing cost of high education has also influenced the decision to pursue college for about 69 percent of those surveyed.
The study further revealed that a concerning 41 percent of teens weren’t receiving any form of financial education in their schools. This raises an important question – what financial knowledge can young adults acquire now that will benefit their future?
Presenting your teen with numerous topics related to finance might lead to disinterest. However, there are a few crucial lessons that can enhance your teen’s understanding of finance. Here are ten fundamental topics to start your discussion:
BUDGETING: Even if your child doesn’t have significant expenses, cultivating a good budgeting habit will encourage mindful management of their funds. Teach them how to track income and expenses, emphasizing the benefits of sticking within their financial means.
SAVING: Foster the habit of saving money. Introduce the concept of paying oneself first where a portion of their income should be allocated towards savings before expenditures. Establishing a savings account can motivate them, as they see their savings increase.
EMERGENCY FUND: Educate your child about creating an emergency fund. This financial safety net can aid during unexpected circumstances like medical emergencies or job loss.
INVESTING: Start by explaining the very basics of investment – stocks, bonds, mutual funds, etc. Make them understand the benefits of compound interest and long-term growth.
DEBT MANAGEMENT: Make your teen aware of the risks and responsibilities tied to loaning money. Discuss credit cards, interest rates, and the significance of timely bill payments.
CREDIT SCORE: Most people are unaware that building of credit scores begins earlier than anticipated. Teach your teen about the importance of a good credit score in practical life.
NEEDS VS. WANTS: It’s essential for teenagers to distinguish between needs and wants. Encouraging them to prioritize essential expenses helps avoid avoidable expenditure.
FINANCIAL GOAL SETTING: Setting financial goals can motivate your teen towards achievement, whether it be a car, college, or vacation.
WORK AND EARNING: Teaching a teenager about work, earning and the correlation between effort and income is a substantial part of their financial education.
UNDERSTANDING TAXES: Explain the basic concepts of financial life lessons, including taxes and their direct implications on their earnings.
