Equipping Your Teenagers with 10 Vital Financial Skills
A survey from February 2022 on Teens and Personal Finance showed that more than half of the teenagers felt unprepared for adult financial responsibilities. Additionally, 69% of them indicated that the rising costs of higher education heavily influenced their decision to pursue further studies or not.
It was also found that over 41% of teens were not receiving any financial education at school. Therefore, it’s important to consider what financial skills young adults can learn now to help secure their financial future.
Talking to your teenager about money can feel challenging, particularly when covering various topics. However, there are essential lessons you can teach. Here are ten ideas to start those conversations:
**BUDGETING**
Encourage budgeting, even if your teen’s expenses are minimal. Show them how to track income and expenses to highlight the importance of living within their means. By categorizing their money, such as into savings and spending, they’ll gain a clearer picture of their financial status, especially when they have specific goals.
**SAVING**
Encourage saving and explain the concept of ‘paying yourself first,’ which means setting aside a portion of income for savings before other expenses. Opening a savings account can motivate them as they watch their balance grow.
**EMERGENCY FUND**
Explain the value of an emergency fund for unexpected situations like health emergencies or unemployment. Starting with as little as $1,000, aim for three to six months’ worth of expenses in a high-yield account to ensure financial security.
**INVESTING**
Introduce basic investing principles by discussing various options like stocks, bonds, and mutual funds. Teach them about compound interest and how it can help grow wealth over time. Encourage learning through books and online courses.
**DEBT MANAGEMENT**
Describe the responsibilities that come with debt. Help them understand credit cards, interest rates, and why it’s crucial to pay bills on time to avoid debt accumulation. Discuss the pros and cons of using credit cards.
**CREDIT SCORE**
Inform them about credit scores and how they affect things like getting a house, a car loan, or renting. Grasping this concept early helps in building a strong credit score.
**NEEDS VS. WANTS**
Help your teen distinguish between needs (essential expenses like food and housing) and wants (non-essential items). Encourage them to prioritize needs and practice responsible spending.
**FINANCIAL GOAL SETTING**
Setting financial goals can boost motivation to save. Whether it’s short-term or long-term goals, like buying a car, paying for college, or planning a trip, clear goals help drive savings efforts.
**WORK AND EARNING**
Teach your teen the value of hard work and how it ties to earning money. Building a strong work ethic and financial responsibility early sets the foundation for a financially knowledgeable adult.
**UNDERSTANDING TAXES**
Start with the basics of income and sales taxes, explaining that they fund public services like education and healthcare. Discuss the importance of tax filing and how it affects overall earnings.
What financial lessons have you shared with your teens?
