A survey conducted in February 2022 on Teens & Personal Finance revealed that 54% of teenagers felt ill-equipped for managing financial matters they anticipate facing in adulthood. Additionally, 69% indicated that soaring higher education costs influenced their decision on whether to attend college or not.
It was also found in the study that 41% of teenagers are not being taught about financial literacy in their schools. This raises the question – what vital financial knowledge can young adults gain now that could positively impact their future finances and life in general?
Discussing a range of finance-related topics with your teenager can be beneficial, but trying to make them a master of all could lead to a loss of interest. However, there are fundamental lessons that you can tutor your teen on. Here are ten such subjects to initiate the conversation:
BUDGETING
Instilling the habit of budgeting in teenagers, regardless of their minimal expenses, is beneficial. Demonstrate to them how to monitor earnings and expenditures, stressing the essence of living within their income. The method of dividing money into different sectors like saving and spending enables them to visualize it and understand its importance when working towards a financial target.
SAVINGS
Promote the practice of money-saving. Discuss the idea of paying oneself first, which involves setting aside part of their income into savings before any expenses. Opening a savings account is an excellent way to begin this practice. The thrill of watching their money grow can stimulate the teen, especially when saving towards a particular goal.
EMERGENCY FUNDS
Educate your teen to set up an emergency fund to cover unexpected financial obligations, such as medical bills or loss of employment. An emergency fund can provide financial safety and peace of mind.
INVESTMENT
Present the fundamental principles of investment to them. Talk about diverse investment options like stocks, bonds, mutual funds and the power of compound interest and long-term wealth accumulation.
DEBT MANAGEMENT
Discuss the potential downsides and responsibilities attached to borrowing money. Highlight the significance of timely bill payments and touch base on credit cards, and interest rates to help them avoid accumulating debt.
CREDIT SCORE
Teach your teen about the importance of maintaining a good credit score as it affects many life situations, such as securing housing or transportation.
NEEDS VS. WANTS
Help your teenager to differentiate between necessities (such as food and clothing) and desires (non-basic, luxury items). Advocate for prioritizing needs over wants.
FINANCIAL GOAL SETTING
Encourage your teenagers to set financial goals. Let them understand that having viable, measurable goals can motivate them to start their financial journey.
WORK AND EARNING
Emphasizing the importance of work and earning to your teenager ensures they develop financial responsibility and a strong work ethic from an early age.
UNDERSTANDING TAXES
Providing them with an elementary understanding of taxes is another key financial lesson – including income taxes, sales taxes, and how they affect their finances. Discuss the obligation of tax filing and explain what taxes are: compulsory payments to the government used to fund public services.
Share your experiences below on how you are teaching these financial life lessons to your teens.
