A recent survey on Teens & Personal Finance conducted in February 2022 revealed that 54% of teens felt ill-equipped for financial aspects of adulthood. Furthermore, the rising costs of higher education influenced their decision to pursue further studies for 69% of these young individuals.
The study also highlighted that 41% of the respondents were not provided financial education at school, leaving a void in their understanding of financial management for their futures. Recognizing this gap, it becomes crucial for us to ponder on lessons that can boost their financial awareness and impact their lives positively.
Introducing finance-related topics to your teens could potentially be overwhelming, resulting in loss of interest. Instead, focus on tackling a few key lessons. Here are ten important topics to get the ball rolling:
1. BUDGETING: Begin by impressing upon your teen the importance of budgeting, even if they only have minor expenses. This will help them appreciate the sense of responsibility that comes with managing their income effectively. Demonstrating how to track income and expenses while reinforcing the significance of living within one’s means can be powerful lessons.
2. SAVING: Cultivate the practice of saving money which can be as simple as establishing a savings account and encouraging them to regularly deposit a portion of their income, prior to any spending.
3. EMERGENCY FUND: Teach them about the necessity of setting-up an emergency fund. This can act as a financial safety net in case of unexpected situations like health emergencies or job loss.
4. INVESTING: Explain the essentials of investing, emphasizing the importance of stocks, bonds, and mutual funds. Stress the importance of compound interest and long-term financial growth.
5. DEBT MANAGEMENT: Educate them on the consequences of borrowing money, highlighting both the positives and negatives. This includes understanding credit cards and interest rates, as well as the importance of timely bill payments.
6. CREDIT SCORE: Impart knowledge about credit scores and how it impacts crucial life decisions like renting a house or purchasing a car.
7. NEEDS VS. WANTS: Help them differentiate between essential and non-essential expenses. It’s important they learn to prioritize necessities over luxuries, even when peer pressure clouds judgement.
8. FINANCIAL GOAL SETTING: Allow them to set financial goals – be it short or long term. Setting achievable and quantifiable goals can motivate them to start their financial journey.
9. WORK AND EARNING: Establish the connection between hard work and earning money. Introduce them to different job opportunities fostering a sense of financial responsibility and underlining work ethics.
10. UNDERSTANDING TAXES: Familiarize them with taxes – income, sales, or any other form. Explain the tax deductions from their paychecks, and reinforce the role of taxes in providing public services.
Hopefully, you find these topics useful in guiding your teen about money matters. We look forward to hearing about your experiences in teaching financial responsibility to your teenagers!
