A survey conducted in February 2022 on Teens and Personal Finance unveiled an alarming observation: over half (54%) of teen respondents felt unprepared for the financial responsibilities awaiting them in adulthood. The escalating costs of tertiary education influenced the decision of an overwhelming 69% of these teenagers regarding college enrolment.
Further, the findings exposed that over 40% of teenagers (41%) receive no financial literacy education in school. Consequently, these statistics highlight the need to consider what monetary knowledge we could impart on the younger generation to benefit their future.
There are an abundance of financial topics to discuss with teenagers; it is crucial, however, not to overload them, or they may lose interest. Rather, concentrate on basic but essential financial lessons. Presented below are ten suggested topics to spark these conversations:
1. BUDGETING: Foster a culture of budgeting, advising your teen to be cautious with money they have. Show them how to monitor savings and expenditures and stress on the significance of living within their financial means. This can help them understand why budgeting is crucial, more so when they have a financial goal.
2. SAVINGS: Propose savings habits, simplify the idea of ‘paying themselves first’ i.e., reserving a percentage of their income for savings before spending. Having a savings account could mainly assist this process.
3. EMERGENCY FUND: Educate them on the value of an emergency fund, which could be useful to cover unforeseen expenses like medical bills or sudden loss of income. This fund shouldn’t necessarily have to start big; even a small amount like $1,000 could kick start their savings, serving as financial security.
4. INVESTING: Make them aware of primary investment terminologies, diverse investment avenues like stocks, bonds, and mutual funds. Enlighten them about compound interest and long-term financial growth by encouraging self-learning methods, provided you have a basic understanding of the market and investment.
5. DEBT MANAGEMENT: Teach them how to manage debt responsibly. Make them comprehend about credit cards, borrowing money and its implications, the significance of timely payments to avoid debt pile-up. Such knowledge could help them understand the pros and cons of credit cards better.
6. CREDIT SCORE: Start their introduction to credit scores early. Make them understand its role in various life scenarios like apartment rentals, purchasing a car or a house, thereby helping them build credit from a young age.
7. NEEDS VS. WANTS: Enable your teen to differentiate between essentials and luxuries. They should be taught to prioritize needs over wants, acknowledging peer pressure in such decisions, and realizing that all possessions need not be premium.
8. FINANCIAL GOAL SETTING: Encouraging financial goals, keen on short to long term, such as saving for a car, college, or vacation. This planning could help them start and stay motivated in their financial journey.
9. WORK & EARNING: Inculcate the essence of hard work and earning money into your teenager’s values. Make them understand the relationship between effort and income through various job opportunities.
10. UNDERSTANDING TAXES: Start by breaking down for them what taxes are, how they constitute their total salary, how it affects their overall finances, and the significance of filing taxes.
Have you imparted any financial life lessons to your teenagers? Let us at SmartAsset.com know!
