Solution for Parents: 5 Ways to Improve Financial Literacy for Teens
Everyone has a financial story. Whether it’s a college loan, taxi, or credit card, your child will inevitably have one of their own. Financial literacy for teens has become an important topic, as it is the first time they face personal finances and everything else surrounding them. Teaching teens the basics of personal finances can help them get a better future.
What is Financial Literacy for Teens?
Financial literacy is the ability to make informed decisions about personal finances, now and in the future. It’s an important skill for teens to learn, as it will help them make the most out of their resources, understand the financial implications of their choices, and prepare for the adult world.
The four main principles of financial literacy for teens start with learning the basics: debt, budgeting, saving, and investing. That’s the four pillars of the BusyKid app rest. There are four different buckets to teach even younger kids about personal finances and how to manage their resources. In essence, it’s crucial to learn these basics as it will get them to make financial plans and achieve them, for example, saving for college.
Financial literacy for teens is not a one-time thing because their relationship with their finances will follow them into the future. It’s a lifelong journey constantly evolving as we learn more about it.
Why is Financial Literacy Important for Teens?
Financial literacy is a crucial life skill. If we look at the National Study by FINRA Foundation1), it finds that the U.S. adults’ financial capability has grown over the last years. Finra also adds that respondents with higher financial literacy knowledge are more likely to utilize their resources rationally. These respondents spend less than their income and set aside up to three months’ worth of emergency funds.
However, it’s not something only adults need to understand. You may see a teen being surprised when their paycheck arrives and a portion of their money goes to taxes. It’s one of the everyday life issues; the sooner they learn, the better off they will be. With the proper guidance, teens can develop a solid foundation of financial knowledge and skills that will help them make sound financial decisions.
Financial literacy is essential for teens because it gives them the tools to manage their money now and in the future. In addition, learning about it will help them avoid financial pitfalls that could lead to debt, overspending, or poor investment choices. If you have ever asked yourself about essential life skills, financial literacy is undoubtedly one of them.
Here are 5 Ways You Can Improve Financial Literacy for Teens
#1 – Get Involved
The best way to improve financial literacy for teens is to show them an example. That means involving them in a financial conversation, whether planning a purchase, paying bills, or calculating taxes. Give them a real-life example they can see and apply in practice. For instance, take grocery shopping as a chance to have them compare prices and look for sales.
That also means if you want them to follow good practice, don’t break the rules yourself. If you do, for example, overspend on some things, make sure to tell them that you just made a mistake and the consequence it will have on your budget or personal finance overall.
#2 – Let the Real World by the Teacher
The real world can improve financial literacy for teens. For example, let’s say you give them a lesson using your finances that might influence them differently as it is not theirs. However, if they take a part-time job and you show them the taxes and perhaps bills, that has a completely different influence.
They have to learn about actual world finances sooner or later. So why not use the opportunity to push them into what awaits in a few years? That is why they should build confidence in managing their finances now instead of later.
#3 – Make it Fun
You must have heard that many times, and no, it doesn’t mean playing a circus act. The one way you can seriously grab their attention is by motivating them. For example, let’s say they need new sneakers and what better way to save money than challenging them? Create a challenge for the entire family.
Set a goal and time for completion. If they win, they can have their reward. Use their strengths if they like computers or mobile find finance management apps that will inspire them to look at the topic differently. Remember that the final goal is to teach them money management so that they can be financially responsible adults in the future.
#4 – Provide them with Options
If they prefer learning independently, you can offer them financial courses, books, or other resources for teens to learn about financial literacy. But, again, there are many options, including online tutorials, whatever makes them feel comfortable to research the topic and find their way into understanding the four main aspects of financial literacy: saving, budgeting, investing, and spending.
#5 – Let them Make Mistakes
Experiences are what make a difference in our lives. Unfortunately, part of that experience are mistakes we make during our lifetime. While teaching by example has its benefits, errors can also significantly impact their future choices.
That doesn’t mean criticizing them for making big purchases. It means letting them know they are not budgeting correctly, and if they spend their paycheck, that’s it. Tell them what portion of your salary goes into bills, taxes, groceries, and other expenses. Show them that budgeting mistakes can be handled quickly but, in the long run, can have serious consequences.
Personal finances touch every aspect of our lives, whether we want it or not. So there is always a way to improve financial literacy for teens. It can be their curiosity which you can leverage, your way of presenting essential life skills or letting them learn through your examples and their mistakes. Whichever way it happens, it’s necessary to teach them how to manage their money correctly so you can be sure that they will grow into financially responsible adults.
BusyKid – the app for teaching and the card for fun! With BusyKid, you can assign chores to your kids, track their progress, and even deposit their allowance directly into their Visa debit card. So you can teach them the value of hard work and earning money and give them financial freedom!
What are you waiting for? Download the BusyKid app today and give your kids a gift of financial literacy!