A survey from February 2022 reveals some alarming news: more than half (54%) of teens feel unprepared for financial adulthood. Additionally, 69% of teens said that high college costs affected their decision to pursue higher education, and 41% aren’t learning about financial literacy in school. Given these numbers, it’s clear that teens could benefit from learning financial skills now to help them in the future.
Talking to teens about money is important, but it’s also essential not to overwhelm them with too much information at once. Here are ten key topics to start with:
1. **Budgeting:** Even if teens don’t have many expenses, learning how to budget can help them understand money management. Teach them to track income and expenses and the importance of living within their means. Encourage them to divide money into saving and spending categories to reach their financial goals.
2. **Savings:** Motivate your teen to save money. The “pay yourself first” method is a good habit, meaning setting aside savings before spending. Opening a savings account can be a great start, and watching their savings grow can be encouraging.
3. **Emergency Fund:** Highlight the importance of an emergency fund for unexpected expenses like medical emergencies or job loss. Starting with $1,000 and aiming to save up to six months’ worth of expenses can provide financial security.
4. **Investing:** Introduce them to the basics of investing, including stocks, bonds, and mutual funds. Explain compound interest and the benefits of long-term financial growth, and point them to useful educational resources.
5. **Debt Management:** Discuss the dangers and responsibilities of borrowing money. Teach them about managing credit cards, understanding interest rates, and the importance of paying bills on time to avoid debt.
6. **Credit Score:** Explain what a credit score is and how it affects their ability to rent an apartment, buy a home, or get a car. Help them understand the importance of building a good credit score early.
7. **Needs vs. Wants:** Guide your teens in distinguishing between essential expenses (needs) and non-essential luxuries (wants). Encourage them to prioritize needs over wants to develop responsible spending habits.
8. **Financial Goal Setting:** Encourage teens to set realistic financial goals and achieve them. This can motivate them and kickstart their financial journey.
9. **Work and Earning:** Emphasize the importance of a strong work ethic and financial responsibility. Help them understand the connection between hard work and earning money.
10. **Understanding Taxes:** Make teens aware of tax obligations, including income taxes and sales taxes, and their impact on finances. Explain what taxes are and why they’re important for public services.
By focusing on these topics, teens can build a strong financial foundation for their future.