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Financial Lessons: 14 Financial lessons Teenagers have to know and understand.

FINANCIAL LESSONS FOR TEENS


Financial literacy is an important part of being a successful adult. Here are 14 financial lessons your teens should understand before they leave your home!


I don’t know about you, but I don’t remember any in-depth financial lessons geared towards teenagers at my high school. Sure, we talked about check books and credits cards once or twice, but lessons on budgeting, saving for retirement, investing, and how to understand and manage money in general were lacking.


You can’t expect your teenager to be fully equipped for life (especially financially) if you send him off to school and never discuss what he learns or how to apply it to real life. Involve your teen in a numerous financial discussions over the entire course of his young life so that he’s prepared to make solid financial decisions when he heads out on his own for the first time.


Here are some financial lessons for teens that they should learn from you:


1.HOW TO MAKE AND KEEP A BUDGET

Important financial lessons for teenagers

First, you have to start with basic budgeting fundamentals. Sit down with your teen and show him/her step by step how to create a budget. Then, encourage him/her to continue every month and keep talking about it.


2. WHAT PERCENTAGE OF THAT BUDGET TO SAVE, SPEND, AND GIVE.

Important financial lessons for teenagers

There are a lot of different ways to approach this. One method is the 50/30/20 rule – spend 50% on needs, 30% on wants, 20% to savings. Tell him to find a way to save and give some money every month.


3. UNDERSTAND CHECKING AND SAVINGS ACCOUNTS

Financial lessons for teens

Include discussions on things like:


which bank to choose

how to read your bank statements

why you should read through each of your statements each month

how to balance your checkbook (and do this regularly!)


4. KNOW HOW TO READ AND UNDERSTAND FINANCIAL STATEMENTS

Your teen should know how to read and understand these types of statements:


checking

savings

credit card

loan

investments

insurance

Your teen should know how to read and understand the different parts of her personal financial statements, especially parts of the statement like interest rate and balance due. Make sure that she checks her credit card and bank statements each month to verify all of her transactions to prevent theft or illegal transfer of money (or just plain bank error).


5. KNOW HOW TO ACCESS AND MANAGE ALL ACCOUNTS

Teach your teenager how to access all accounts in person at the bank and online. He/she should know how to keep his or her account numbers and passwords safe.


6. KNOW WHEN TO START SAVING

Financial lessons for teens

(hint: now!)


Encourage your teen to start saving at least a little bit of money each month. Also, discuss the need to have an emergency fund in addition to a regular savings account.


7. START SAVING FOR RETIREMENT EARLY

Financial lessons for teens

Once your teen starts working regularly, encourage him to open an IRA and start saving for retirement. Tell him to always take up his employer’s offer to match savings – this is free money! Talk about compound interest and why it’s important to start saving early so the final amount is greater at retirement.


8. HELP YOUR TEENAGER UNDERSTAND WANTS VS. NEEDS

When you’re young it’s sometimes hard to delay gratification, but talk to your teen about legitimate needs vs. wants. Discuss the importance of meeting needs first and finding a way to include some wants in her budget. Talk about how to save up for wants and the satisfaction this brings.

Joana an American parent said 

"One thing that has helped me is to have some “fun money” set aside every month. For many years, my husband and I had $40 set aside each month for fun spending money. For me, this money usually went toward getting a coffee, having a treat, or buying something small that I wanted. My husband used his to buy snacks at work or go out for coffee or lunch with his co-workers. Many months I didn't spend the whole $40 and whatever was left went back into savings."


If you are too strict and your teenager doesn't get to spend any money on fun whatsoever, he can really get discouraged with budgeting in general.


9. UNDERSTANDING WHAT DEBT IS AND HOW TO AVOID IT

There are all kinds of ways to get into debt (loans, credit cards, mortgages, etc.) Basically debt comes from buying something that you don’t have the cash to pay for up front right now. Talk about ways to avoid or reduce debt in the long run.


10. UNDERSTANDING HOW CREDIT CARDS WORK

Important financial lessons for teenagers

And why to avoid using them!


Credit cards are another form of debt but I think they can be more dangerous than other forms and deserve another (or several) separate discussions about how and why to avoid them (and how credit card debt can get really ugly, really fast!)


11. UNDERSTANDING INSURANCE

Financial responsibility includes understanding the different types of insurance and which types to get (and when and why.)


Make sure to have this discussion with your teen.


12. HOW TO SET A FINANCIAL GOAL AND MAKE A PLAN TO REACH IT

Financial lessons for teens

Some goals your teen might have in mind:


buying a car

buying a house

attending college

going on a fun vacation

starting her own business


13. HOW TO LIVE WITHIN HIS MEANS

Creating a budget and sticking to it will help your teenager learn to live within his means. Your teen may find it tempting to buy the latest electronic gadget or item of clothing to keep up with his peers.


Teach him or her ways to be frugal – how to shop for bargains and still stay within the budget. Living within your budget means avoiding long-term, heavy debt!


14. HOW TO BE AN ENTREPRENEUR

Important financial lessons for teenagers

Finally, just because your teen is not an adult yet, doesn’t mean she can’t start a small business. Does she have a particular skill or interest that she can use to turn into a side business? Be creative!


Make sure you teach these 14 financial lessons to your teens before they leave home. Prepare them for a financially successful life! I’d love to hear your thoughts or ideas! Please share them below.


RECAP: FINANCIAL LESSONS FOR TEENS

How to make and keep a budget

What percentage of that budget to save, spend, and tithe.

Understand checking and savings accounts

Know how to read and understand financial statements

Know how to access and manage all accounts

Know when to start saving

Start saving for retirement early

Help your teenager understand wants vs. needs

Understanding what debt is and how to avoid it

Understanding how credit cards work

Understanding insurance

How to set a financial goal and make a plan to reach it.

How to live within his means

How to be an entrepreneur. 


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