Many teenagers know the basics of money management, but I know many parents and educators want better financial literacy for teens. They want teenagers to be given more knowledge and I know that teenagers want this also. They want to understand financial wellbeing, they want to learn how to make money and how to manage money effectively.
My own teenagers often say they wish they learnt more about financial literacy in schools, they go as far as saying that financial education should be on the curriculum in a more obvious way. . In this post, I’m sharing the explosive lessons I have taught my teenagers and those that I have coached and taught over the years.
If you are a financially responsible person, you must be aware of the fact that money does not come for free, and simply earning it does not make our lives sorted. However, if you look back to your teenage years, you’d realize you were too naïve back then to take money matters seriously and develop good financial habits. Maybe you did not know how hard it is to earn money, or you were negligent about managing it.
Nevertheless, since you cannot do anything to undo your past, you certainly would not want your children to make the same mistakes. You would want them to be responsible with their own money, and most importantly, financially literate and have proper financial knowledge that will help them and provide financial independence.
But, if you don’t know where to start, don’t worry, I am determined to help promote financial literacy for teens as it is such an important topic.
Financial literacy for teens and high school students
Here are all the tips you need to promote financial literacy in your teen kids.
1. Money management through account
Being financially dependent, some parents do not feel the need for teens to have their bank accounts. This is why most adults do not get acquainted with banking dynamics at all.
Nevertheless, you still have time to make sure your children don’t join the list. You can help them develop a better understanding of banking procedures, jargon, and their rights by encouraging them to handle and operate their own savings accounts. There are many young savers accounts and student accounts that have some good offers for young people and this teaches financial literacy for teens. We suggest getting young teens their own account that comes with a debit card as they will learn to budget and manage their money from a young age.
2. Convince them to save for college / university
College or university education is expensive; in fact, most parents have to financially contribute to their teenager’s education. However, this can be helped if kids contribute too, be it in the form of savings or working part-time jobs. My own kids got their first job in the holidays so that they had a good buffer to take back to university with them. Saving in the run-up to university starting is also important and a great life skill for young people. Student loans are rarely enough for students to manage on and is well versed in personal finance from an early age is going to be helpful and give them a head start. A summer job teaches valuable money skills but it also has a whole host of other benefits for a young person including improving communication skills and teamwork.
3. Help them understand the difference between wants and needs
There is a difference between want and need. Wants come from desires, and needs come from necessity. However, teenagers and college students often confuse them for each other, and what comes later is a heavy bill to pay. This can be avoided if they can recognize the difference before making any purchasing decision. I encourage my teens to wait 24 hours or so before making a purchase as this helps distinguish between impulsive buys and well-thought purchases. This is a great mindset to have when teaching financial literacy for teens.
4. Train them to not become an impulse shopper
Most of the time, teenagers are impatient in their purchasing decisions. They either end up paying more for products that cost less elsewhere or end up purchasing things beyond their means.
Having said that, you can train your teens to be sagaciously patient and look for better deals before buying anything. My teenagers know to use TopCashBack when buying online or use discount codes to save themselves some money in the real world!
5. Teach them the perils of credit cards
Most teenagers with a credit card think they can buy anything they want because they do not have to manage bills. However, as soon as they turn 18, their dependence on credit cards only makes things worse by adding to their debts.
As parents, you can make them aware of the downside of using credit cards. In fact, you can raise them to depend on debit cards and cash, instead of going for credit cards and racking up credit card debt. It is an important lesson in financial literacy for teens and one that we have modelled to our kids.
6. Teach them compound interest
This is the biggest financial lesson that my own teenagers wanted to understand. From a banking to investment point of view, a clear understanding of interest rates and specially compound interest is necessary. They might learn the concept in school, but it is you who can provide them with practical examples to ensure a strong understanding of the concept. Most successful adults recognise that early saving and creating financial goals determines wise decisions in the future.
7. Have tax talks
Tax is much more complicated than your teenagers might perceive it to be. So, a basic knowledge of it can facilitate a stronger hold of taxes in the future for your child. Hence, again, don’t depend on schools; teach your kids practically about taxes yourself. My son is studying A Level Business studies and economics therefore he has helped me with my own bookkeeping over the past 18 months. It helps his understanding of tax in a practical way along with the theoretical understanding.
8. Convince them to start budgeting
As said before, simply earning money is not enough, you must know how to manage it as well, and the best way to do that is through a budget.
Sadly, not all young adults practice budgeting because they were never in the habit of doing that. However, you can ensure that your child practices budget by introducing habits and activities that facilitate budget management.
For instance, giving them a fixed monthly allowance and asking them a rough report on how they’re planning to spend it.
9. Encourage money making
Unlike adults, children get a lot of free time to make good use of. Thus, it is a great idea to encourage them to do part-time jobs and manage their own expenses. All the more, you can encourage money-creation to multiply their wealth through stocks. The early they start, the better off they will be in the future. Our teenagers can be really entrepreneurial and amazing at working on side hustles my son does some reselling and my daughter qualified as Personal Trainer alongside her degree so that she has the skill set for an additional side hustle. She now works a few shifts as a PT in order to help her save to move out of home and build a solid financial future.
10. Last but not least, let them fail
As they say, failures are the best teachers. Your children would encounter failure in the future, but they must know that failures are not the end. Instead, it is an opportunity to learn and make things right.
As parents, you can help them with that. Raise them in such a way that they don’t become afraid of failures, but problem-solvers and fixers.
That’s all I have to say. I hope all these tips help your teens become financially literate. All the best and have a nice day!
Let me know how you feel about the article on financial literacy for teens in the comment section.