A survey conducted in February 2022 about teens and personal finance found that more than half of the teenagers (54%) feel unprepared to manage financial matters as they transition into adulthood. Additionally, about 69% said that the rising costs of higher education have impacted their decision to go to college. Another surprising finding was that 41% of teens aren’t being taught financial literacy in school. Considering this, it’s crucial to think about the financial knowledge young adults should acquire now to positively influence their future financial well-being.
As a parent or guardian, there are many financial topics you can discuss with your teen. However, giving them too much information at once can overwhelm them. It’s better to focus on some key financial principles. Here are ten essential concepts to start the conversation:
1. **Budgeting**: Show why budgeting is important, even if they don’t have many expenses. Encourage them to keep track of their income and spending, emphasizing the need to live within their means.
2. **Saving**: Promote regular saving habits. Teach them to pay themselves first by setting aside a portion of their earnings for savings before spending on other things.
3. **Emergency Fund**: Explain the importance of having an emergency fund to cover unexpected expenses like medical emergencies or sudden job loss.
4. **Investing**: Introduce them to basic investment ideas like stocks, bonds, and mutual funds, and explain how compound interest and long-term growth work.
5. **Debt Management**: Discuss the responsibilities that come with borrowing money, including credit cards and interest rates, and the importance of paying bills on time to avoid debt.
6. **Credit Score**: Make them aware that their credit score can impact major future purchases like a home or car, and teach them how to build and maintain a good credit score.
7. **Needs vs. Wants**: Teach them how to distinguish between essential expenses (needs) and items they can live without (wants).
8. **Financial Goal Setting**: Encourage them to set financial goals to motivate themselves, such as saving for a car or a special trip.
9. **Work and Earning**: Instill the value of hard work and financial responsibility, highlighting the connection between effort and monetary rewards.
10. **Understanding Taxes**: Help them grasp the basics of income and sales taxes, and stress the importance of filing tax returns.
Ensuring your teens are financially literate is a vital step towards their future financial success.