A survey from February 2022 on Teens and Personal Finance revealed that more than half of the teenagers (54%) don’t feel ready to manage financial matters as they grow up. About 69% mentioned that rising college costs have impacted their decision to pursue higher education. Surprisingly, 41% of teens aren’t being taught financial literacy in schools. This makes us think about the financial principles that young adults can learn now to help them in the future.
If you’re a parent or guardian, there are many finance topics you can discuss with your teen. However, too much information at once can overwhelm them. It’s better to focus on some key financial principles. Here are ten important topics to start the financial conversation:
1. Budgeting: Show them the importance of budgeting, even if they don’t have many expenses. Encourage them to track their money coming in and going out, and explain why living within a budget is crucial.
2. Saving: Teach them to save money regularly. Explain the idea of paying themselves first by saving a part of their earnings before spending on anything else.
3. Emergency Fund: Highlight the importance of having an emergency fund to cover unexpected expenses like health issues or sudden job loss.
4. Investing: Introduce basic investment ideas like stocks, bonds, and mutual funds. Explain how compound interest works and the benefits of long-term investments.
5. Debt Management: Discuss the consequences of borrowing money, including credit cards and interest rates. Teach them about the importance of paying bills on time to avoid debt.
6. Credit Score: Explain how credit scores impact major future purchases like houses or cars, and teach them how to build a good credit score.
7. Needs vs. Wants: Help them understand the difference between needs (essential expenses) and wants (non-essential purchases).
8. Financial Goal Setting: Encourage them to set financial goals, motivating them to save for things like a car or a special trip.
9. Work and Earning: Instill a strong work ethic and financial responsibility, emphasizing the link between hard work and financial rewards.
10. Understanding Taxes: Explain the basics of income and sales taxes and how they affect earnings, highlighting the importance of filing tax returns.
Remember, teaching your teens about finance is pivotal for their successful financial future.