Reasons Why Financial Literacy is Important for Teenagers
When was the last time you spoke to your kid or teenager about money? Can you recall the details of the conversation? When and why did you have the conversation? One of the greatest gifts that you can give to your teenager is to talk about money and finances. Just like there is a pep talk. How about having some ‘Money Talk’ or ‘Finance Talk’ with your kid?
This is one of the topics that even kids and teenagers would love to explore more with you. Under usual circumstances, teenagers are taught about life after high school or their days in college, it is also important to introduce them to financial aspects right from an early age. This needs to be built into a habit for teenagers to make them financially independent and responsible in the future.
What is financial literacy?
It is the ability to use knowledge and skills to manage financial resources effectively and efficiently for long-term success and growth. In essence, it is about educating them in the key areas related to “savings, growing, and protecting money.’
It is an important life skill and the earlier kids get exposed to the facets of financial literacy, the better it is for their future. And when it comes to starting the journey of Financial Literacy, what better place than your home to start with? It is a safe space where they can ask questions and even make mistakes to learn. After all, who more than the parents are more interested in the financial security of their kids?
Some of the reasons why it is important to teach teenagers and kids Financial Literacy:
Understanding the difference between the Needs and the Wants:
It is important to make the kids aware of the differences between Needs and Wants. At various junctures in their life, they would have to make decisions based on the fact whether a particular thing is a need or is it a desire or a want. This will also help them in planning their budget for the future and how they should proceed to save money for their wish list items.
It teaches them value for money.
They can make more smart decisions related to money in the present and future.
Teenagers can learn to make money work for them
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Making them financially independent:
Let them take charge of their finances right from an early age. whether it’s for their own shoes, clothes, or a game they want to buy. This is one of the experiential learning opportunities that will go a long way toward making them financially independent.
Say no to or avoid debt.
It is easy to get locked into a cycle of debt. While a credit card is a great instrument to manage finances, misusing it will lead to a situation of mounting interest costs. It is important to make them understand the interest rates and other aspects related to credit card spending.
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Get Accurate Information
It is important to share accurate information. With the advancement of technology and the spread of fake news, it is critical to discuss the sources of information and how it should be used to improve financial knowledge.
Get a Head Start
The earlier the better. The earlier teenagers are exposed to financial facets, the better it will be for their future. Kids need to be taught about credit, debt, EMIs, compound interest, and multiple elements related to finances right from a very early age. It would be better to make them financially independent by empowering them to control their own money and make better and more informed decisions.
Some of the other benefits of Money Talks at home to improve financial literacy are:
- It will normalise conversations related to money at home.
- It will help them to make better financial choices in future
- They may not learn to manage finances any other way
- They would become more appreciative and understand the value of money
- They will be better planners and decision-makers.
- They would lead healthier and stress-free lives.
Why share personal stories with your kids?
You have seen it all. You have managed your finances, which may have been good or bad financial decisions. There would be plenty of stories and experiences that you could share with your kids. Don’t be afraid to share the best and worst financial decisions of your life. Be it falling into a debt trap or managing your loans smartly to save on interest costs. Revolving the credit card limit efficiently or managing it with the minimum balance payment. Experience with your education loans or other home or auto loans. Share both good and bad stuff with them.