Financial Literacy for Teens: 10 Must-Know Basics
Financial Literacy for Teens
Like many other critical life skills, financial literacy and responsibility have to be taught. If you are parenting a teen, then you should know that their teenage years are ideal for teaching them about finances. Let’s talk about financial literacy for teens and the 10 must-know basics.
1. Teach Money Management Through a Bank Account
Instead of giving them long boring talks on money management that rarely work, open a bank account in their name. Many banks offer special accounts for young people. These accounts come with simple terms and conditions to ensure a teen can use it without needing anyone’s help.
2. Convince Them to Save for College
If they’re working a summer job, or have a part-time job, then persuade them to set aside some of their earnings in a college savings account. This activity will inculcate the habit of savings in them and help them realize the importance of money in college life.
3. Help Them Understand the Difference Between Wants and Needs
Teenagers are heavily influenced by what they see online and what their friends are doing. Many times these external factors make teenagers forget about the difference between Wants and Needs. Therefore, you have to remind them time and again of this difference with hands-on examples.
4. Teach Them How to Avoid Impulse Purchasing
Impulse buying is not a new phenomenon, and it affects everyone, not only teenagers. Since e-commerce has made buying entirely hassle-free, one has to be aware of their shopping/buying behavior to avoid overspending. It is often seen that teenagers burn through their hard-earned savings in the blink of an eye due to impulse buying.
5. Have a Session on the Perils of Credit Cards
As a parent and guardian, it is your responsibility to educate your young ones about the dangers of credit cards and how to properly utilize them. You have to tell them how relying on credit cards can create a vicious cycle of debts, but also how you can safely take advantage of using credit cards.
6. Teach Them the Concept of Compound Interest
Compound interest lies at the core of our financial system. Whether it is loans or investments, compound interest is one factor that determines their values on the other side of the horizon. By making them understand its concept, we don’t mean only teaching them the calculations for compound interest.
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