A recent survey on Teens & Personal Finance from February 2022 showed that over half of the teens polled (54%) feel unprepared for future financial challenges. Additionally, the rising cost of higher education has impacted the decision to go to college for about 69% of them.
The survey also found that a worrying 41% of teens weren’t getting any financial education in school. This raises the question: what financial skills can young adults learn now to help them in the future?
Bombarding your teen with too much financial information might overwhelm them. However, focusing on a few key lessons can significantly improve their financial understanding. Here are ten essential topics to start with:
**Budgeting:** Even if your child doesn’t have many expenses, learning to budget teaches them to manage their money thoughtfully. Show them how to track their income and expenses and the importance of living within their means.
**Saving:** Encourage your teen to save money by introducing the concept of paying themselves first—setting aside a portion of their income for savings before spending. Opening a savings account can motivate them as they watch their savings grow.
**Emergency Fund:** Teach your child the importance of having an emergency fund for unexpected events like medical issues or job loss. This fund acts as a financial safety net.
**Investing:** Begin with the basics of investing, such as stocks, bonds, and mutual funds. Help them understand the benefits of compound interest and the potential for long-term growth.
**Debt Management:** Discuss the risks and responsibilities of borrowing money, including the use of credit cards, interest rates, and the importance of paying bills on time.
**Credit Score:** Educate your teen about the importance of a good credit score, which can start being built earlier than many realize. A good credit score is crucial for many practical aspects of adult life.
**Needs vs. Wants:** Teach teenagers to distinguish between necessities and extras. Prioritizing essential expenses helps prevent unnecessary spending.
**Financial Goal Setting:** Help your teen set financial goals to motivate them, whether it’s saving for a car, college, or a vacation.
**Work and Earning:** Explain how working and earning money are connected. Understanding the relationship between effort and income is crucial for financial education.
**Understanding Taxes:** Teach them the basics of taxes and how they affect earnings. Knowing about taxes is a key part of managing personal finances.
By covering these topics, you can help your teen build a solid foundation for a financially secure future.