In a survey conducted in February 2022 on teens and personal finance, 54 percent of teenage respondents expressed feeling ill-equipped for financial realities of adulthood. A significant 69 percent revealed that the escalating costs of tertiary education have factored into their decision against attending college. Furthermore, the study revealed that about 41 percent of the participating teens haven’t received any financial literacy education in school. This begs the question of what financial literacy skills could young adults benefit from learning now to positively affect their lives and finances.
There are an array of finance-related topics that parents can broach with their teenagers. Therefore, it’s essential to keep the discussions engaging to retain their interest. Here are ten critical subjects to initiate these imperative conversations:
1. BUDGETING: Introduce your teenager to budgeting. Teach them to handle their income responsibly, regardless of the amount or source. Show them how to meticulously keep track of their income and expenditure to live within their budget.
2. SAVING: Encourage them to save by setting aside a fraction of their income before making any spendings. This practice, also known as paying oneself first, nurtures a saving culture. Seeing the money grow can be an exciting phenomenon, especially if there’s a goal attached to it.
3. EMERGENCY FUND: Highlight the importance of an emergency fund for unforeseen circumstances like medical emergencies or a sudden loss of income. This fund offers financial stability and peace of mind.
4. INVESTING: Familiarize them with the fundamentals of investment and the magic of compound interest. Discuss different investment options available, such as stocks, bonds, and mutual funds.
5. DEBT MANAGEMENT: Discuss the implications and responsibilities that come with borrowing money. Teach them about credit cards, interest rates, and the necessity of timely bill payments to avoid debt accumulation.
6. CREDIT SCORE: Discuss the importance of a good credit score, which starts building earlier than they might think. A good credit score can affect various aspects of their life from renting accommodation, buying a house, or even a car.
7. NEEDS VS. WANTS: Teach them to differentiate between essential expenses (needs) and desirable but non-essential items (wants). Encourage them to prioritize needs over wants.
8. FINANCIAL GOAL SETTING: Encourage them to set and achieve financial goals, whether they are for the near or distant future. Having a clear goal is often the necessary motivation to kickstart their financial journey.
9. EARNING AND WORK: Talk about the importance of working and earning. Emphasize the connection between effort and income, and instill work ethics and financial responsibility.
10. UNDERSTANDING TAXES: Provide them a basic understanding of taxes, including income taxes and sales taxes, and how they affect their finances.
Always be open to your teens when it comes to financial conversations. This openness helps them better understand and engage with these critical subjects.
