Results from a survey on Teens & Personal Finance, conducted in February 2022, highlight that over half (54%) of the teenage participants felt ill-equipped to handle the financial complexities of adulthood. Furthermore, 69% cited escalating education costs as a decisive factor in their decision to pursue higher education.
The study also revealed 41% of the teen respondents were not privy to any financial education at school, prompting us to consider what financial acumen can be imparted now that would benefit their futures.
To help teens understand finance, consider raising a few choice topics rather than an overwhelming number. By concentrating on key life lessons, they are likely to stay engaged. Here are ten practical discussions to get the dialogue going:
1. BUDGETING: Inspire teens to budget their resources to manage their income mindfully. Teach them to monitor their income & expenses, stressing the need to live within their means. Dividing their budget into categories can create a visual representation that might help them grasp the importance of budgeting, particularly to achieve financial goals.
2. SAVING: Encourage the habit of saving. Make them understand the idea of “paying themselves first” by squirreling away part of their income before making purchases. Start a savings account to make the process real for them.
3. EMERGENCY FUNDS: Explain the necessity of emergency funds to cover unexpected expenses such as medical emergencies or loss of income. It’s a financial safety net that offers resilience and peace of mind.
4. INVESTING: Introduce simple investing concepts, discussing options like stocks, bonds, and mutual funds. Ensure they comprehend the essence of compound interest and long-term financial growth. Encourage them to educate themselves further on the subject.
5. DEBT MANAGEMENT: Teach them the risks and obligations involved with borrowing money. Discuss credit cards, interest rates, and the implications of timely bill payments to prevent debt accumulation.
6. CREDIT SCORE: Explain what a credit score is and how it influences several spheres of their life, such as acquiring a house, a car, or even renting an apartment. Having discussions about maintaining a healthy credit score can ensure they are prepared to build it responsibly.
7. NEEDS VS. WANTS: Help them distinguish between essential and frivolous expenses. Urging them to give precedence to needs over wants is a valuable lesson, particularly for teenagers who might confuse the two under peer influence.
8. FINANCIAL GOALS: Teach the value of setting financial goals. Ensuring the goals are achievable and tangible can motivate teens to focus on their monetary aspirations.
9. WORK ETHIC: Instill in teenagers the significance of hard work and income generation. Educate them about diverse job opportunities and the correlation between effort and earnings.
10. UNDERSTANDING TAXES: Provide a basic understanding of taxes including income and sales taxes, and how these influence their overall fiscal condition. Discuss the essence of tax filings and their impacts on net earnings.
Engaging in these candid financial discussions with your teens is a great way to equip them with essential life skills.
(www.smartasset.com)
