Here are 4 important money lessons that teenagers must know to become financially-wise adults. Read on.
Let’s be honest – financial literacy is not something that is taught in school and financial exclusion of children is something we Indians have mastered over the years. While parents want to provide the best education and quality of life to their children, they often forget to equip them with smart money habits that will be vital for them in the long run.
Therefore, it’s important for you to fill the gaps and make sure your child is prepared to face the real world and be financially successful in life. So, here are 4 financial concepts that teenagers should understand before graduating from high school to become self-sufficient adults:
Budgeting & Savings
Today, many young professionals in the age group of 22-30 live paycheck-to-paycheck and often find themselves struggling in case of a financial emergency. With that in mind, it’s important for parents to explain concepts like savings and budgeting at an early age.
Make them understand the value of money and the hard work that goes into earning it. For example, you can involve them in day-to-day purchases like groceries, toiletries, etc. Ask them to save a portion of their pocket money for college, no matter how small the amount is. Doing this will help your college-bound teen to prepare for the next big step in their life.
Next step is to introduce them to the world of budgeting. They should be aware of where and how they spend their money each month and should be able to track and manage their expenses. Today, there are a lot of budgeting apps to help you budget, set goals, and track spending. This will not only help them manage her finances better but also instil the discipline to live within one’s means.
Bank Accounts
By the time your kid’s a teenager, you should be able to set them up with a simple Savings Account. It’s important for them to understand how a bank account works and various fees and charges associated with it including ATM fees, minimum balance amount etc. Teach them how to write a cheque and how it works. Also, explain how Debit Cards work and how to safeguard all the important information to protect oneself from any fraud.
Additional Reading: 6 Things To Consider Before Opening A Kids Savings Bank Account
Credit Cards
While financial literacy is important at any age, late teens is also a critical time to start building a good credit history. Teens need to know how to handle Credit Cards responsibly. Take out time to explain to them the entire process – how it works, different Credit Card offers available, interest rates, credit limit among others.
It’s a good idea to ask your child to go through your monthly Credit Card statements to understand the billing period and charges associated with it. At this stage you can also teach them how paying your bill amount in full positively affects your Credit Score, a number that determines your eligibility to get a good deal on loans and Credit Cards.
The Basics Of Investing
As they get comfortable with concepts like saving & budgeting, it is important you familiarise them with various investment tools like Fixed Deposits, Mutual Funds, recurring deposits, etc. that can last a lifetime. Your child doesn’t need to be an investing genius, but they do need to have a basic understanding of how compounding works, the difference between saving and investing, etc.
Talk to them about the benefits of investing at a young age. For starters, you can open a small Fixed Deposit account for your child to make investments. Introduce them to online investment options, tax filing, purchase of insurance, etc. And, once your child gets older, you can provide a more detailed explanation of stocks and other investments.
So, it’s time to sit down and have the talk! These important money lessons will help your child develop lifelong money management skills and making informed decisions when they grow up.