According to a survey on Teenagers and Personal Finance conducted in February 2022, 54% of the participating teenagers felt unequipped for managing finances in adulthood. Additionally, the escalating cost of further education has influenced the decision of 69% of the respondents to attend college. The study also revealed that 41% of teenagers haven’t received financial education in school. This raises the question of what financial wisdom young adults can gain now, which would beneficially affect their future finances and life overall.
To address this, consider initiating conversations about various financial topics with your teenager. Remember not to overwhelm them with an overload of information, which might make them lose interest. Now, let’s look at ten fundamental financial management topics to kick-off these discussions:
1. BUDGETING: Help your teen develop a habit of budgeting even for their minor expenses. This helps them manage their available resources wisely. Teach them how to monitor income and expenses, focusing on the need to live according to their means.
2. SAVING: Cultivate in your teen the habit of saving by teaching them to set aside a portion of their money before spending on anything else. Opening a savings account can be a good start.
3. EMERGENCY FUND: Encourage your teen to start an emergency fund, intended to cover unexpected expenses like medical emergencies or a potential income loss. This gives financial security and peace of mind.
4. INVESTING: Introduce them to the basics of investing, such as stocks, bonds, and mutual funds. Make them aware of concepts like compound interest and long-term financial growth.
5. DEBT MANAGEMENT: Make them understand the responsibilities and potential pitfalls of borrowing money. Teach about credit cards, interest rates, and timely bill payments to avoid debt.
6. CREDIT SCORE: Teach your teen about what a credit score is and its impact on significant aspects of their life such as renting a house and purchasing a car.
7. NEEDS VS. WANTS: Guide your teens to differentiate between their needs and wants, urging them to prioritize needs over non-essential items.
8. FINANCIAL GOAL SETTING: Encourage your teen to set financial targets, whether short or long term. It can motivate and guide them to start managing their finances better.
9. WORK AND EARNING: Teach your teenager about different job opportunities and the relationship between effort and earnings. Impart the importance of diligent work and ensuing financial responsibility.
10. UNDERSTANDING TAXES: Helping your teen understand taxes will equip them to handle greater financial responsibilities in the future. Teach them about income taxes, sales taxes, and other mandatory deductions from their earnings.
Lastly, share some of the financial life lessons you have taught your teenagers. Engaging with them can lead to fruitful discussions that will benefit them in their financial journey. As featured in Smartasset.com.
