According to a Teens and Personal Finance Survey conducted in February 2022, over one half (54%) of the participating teenagers felt unequipped to handle financial matters as they move into adulthood. Around 69% of them stated that the escalating costs of higher education have influenced their decision to pursue college. Surprisingly, the study revealed that 41% of teenagers are not being taught financial literacy in schools. This leads us to ponder what financial truths young adults can grasp now that could profoundly affect their future financial health.
As a parent or guardian, there are numerous finance-related subjects you can broach with your teenage child. However, bombarding them with too much information at once may result in disinterest. So, it is more effective to focus on teaching them some key financial principles. Here are ten core concepts to initiate the financial conversation:
1. Budgeting: Demonstrate the necessity of budgeting, even if they do not have significant expenses. Encourage them to track income and outgoings, highlighting the significance of living within their budget.
2. Saving: Advocate for consistent money-saving habits. Let them understand the principle of paying themselves first by stashing a portion of their earnings for savings before other expenses.
3. Emergency Fund: Educate them about the indispensability of an emergency fund, which provides coverage for unexpected needs like health emergencies or a sudden loss of income.
4. Investing: Introduce basic investment concepts like stocks, bonds, and mutual funds, explaining compound interest and long-term economic growth.
5. Debt Management: Clarify the consequences and obligations of borrowing money, elaborating on credit cards, interest rates, and how timely bill payments can fend off debt.
6. Credit Score: Make them recognize that credit scores can affect their future bigger purchases like a house or car, and effective steps to build a good credit score are vital.
7. Needs vs. Wants: Differentiating between necessary expenses (needs) and discretionary purchases (wants) is an essential lesson to grasp.
8. Financial Goal Setting: Encourage setting financial goals to motivate work towards achievable objectives such as saving for a car or a special trip.
9. Work and Earning: Foster strong work ethics and financial responsibility, emphasizing the association between effort and monetary rewards.
10. Understanding Taxes: Familiarize them with basics of income and sales taxes and their impact on their earnings, stressing the importance of filing tax returns.
Remember, ensuring financial literacy among your teens is a necessary step towards their successful financial future.
