The importance of financial education for teens and young adults should not be underestimated. Lessons in financial education can help your teen or young adult avoid mishaps like overdrawing their bank account, getting in debt by using credit cards, and not making a budget can go a long way to help them transform these slip-ups into valuable, lifelong lessons.
Taking the time to educate your children and guide them on a path toward financial wisdom is a smart choice for parents, so they are prepared to make savvy financial choices in their current lives as well as in the future.
Navigating the financial world can be a challenging endeavor, especially for teens and young adults taking their first steps towards financial independence. Common missteps, such as overspending or mismanaging a budget, are not just mistakes but valuable learning opportunities. By understanding these pitfalls, parents can play a crucial role in helping their teens and young adult children transform financial mishaps into life lessons. From setting up a savings plan to understanding the value of money, we'll explore strategies for your child for a future of financial confidence and competence.
One of the ways young adults can easily get into a financial crisis is through impulse buying. In fact, their financial education should begin with a lesson about the concept of a “wish list” to encourage better spending planning. A great strategy for parents is to encourage a waiting period before making purchases and also to prioritize the items on their “wish list” so they can make and achieve saving and spending goals.
Credit cards can be so alluring to teens and young adults. The instant gratification they offer is enticing, but the debt and excessive interest charges are a serious pitfall and a hard financial lesson to learn. It’s a good idea for parents to explain how credit works and the impact of interest rates to first-time credit card users. They may also want to help their teens start building their credit history with a prepaid or secured credit card as a learning tool.
When teens and young adults are not taught the benefits of savings, they are missing out on a very crucial life money lesson. Learning to be responsible and have a money plan instead of spending aimlessly and wasting their funds is always a good idea whether they are 16 or 26! Parents should encourage teens to set up a savings account and to make regular deposits. They can then be rewarded by setting a savings goal for an item they want and enjoy the feeling of accomplishment when goals are met.
While budgeting sounds like a complete bore; it really doesn’t have to be. Instead of allowing teens to recklessly spend and waste their earnings or allowance, teach them instead how to stick to a budget that allows a bit of spending for everything they want and need. Technology gets the attention of the younger generation, so take advantage of fun budgeting apps to gamify the experience. Also, be sure to set challenges and celebrate milestones when they successfully navigate their newly made budget.
Do not underestimate the value of talking to your teens and young adults about money, including credit, savings, and other financial concepts. Having money conversations on a regular basis can help them feel more comfortable when dealing with finances.
Parents who lead by example are building a great financial foundation for their children. Maintaining an open, judgment-free dialogue about money and introducing teens to financial management tools and apps can help reinforce their financial responsibility and make them savvier with money in the future. Be open to listening, helping, and understanding that mistakes are learning opportunities and guide them on a path to financial independence.
Finex Credit Union is here to help your young family members get started on their financial journey. With a Youth Checking Account, your young savers will have a place to deposit their money while learning practical money management skills. If you have any questions please feel free to contact Finex today!
