A few simple steps can get teenagers interested in financial literacy

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Q: I didn’t grow up in a family where we talked much about anything. If we had questions, we kids had to figure things out pretty much for ourselves. Thankfully our grandparents were around and we could ask them. In many ways, my grandpa is more like my dad. It’s from him that I learned about saving up for what I wanted. While his advice was kind of old school, it helped me get to where I am today. Now I’ve got two teenagers and a recent high school grad at home who have all started working part time around their class schedules. I’d like to share the old school advice that worked for me, because it can work for them as well, but how do I explain things in a way that they’ll listen? ~Edwin 

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A: Navigating the world of personal finance can be daunting, especially for teenagers and young adults who are just starting to manage their own money. As they transition into adulthood, it’s crucial to equip them with the knowledge and skills they need to make informed financial decisions. From budgeting and saving to understanding credit and debt, there are several key topics that can set up teens for a successful financial future. However, as every parent or caregiver knows, the challenge in our fast-paced society is to capture our kids’ attention and make the information stick, because fostering financial literacy early on will help our young people build a strong foundation for financial independence and well-being.

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With that in mind, here are tips about the essential financial concepts you’ll want to help your young people learn, and practical ways on how to engage them in these important conversations.

Budgeting and money management

Budgeting is a crucial skill for teens and young adults to master. While it involves creating a plan for how to spend and save money, which helps them prioritize their expenses, it starts with earning money and understanding the rationale for deductions on their pay stubs. Then, by tracking their spending and understanding where their money goes, they can make informed decisions about what is essential and what can be cut back. Living within their means is vital to avoid debt and financial stress once they’re old enough to use credit. Additionally, saving for future goals, such as education, travel, or emergencies, ensures they are prepared for unexpected expenses and can achieve their dreams. If you’re worried that your own budgeting skills aren’t good enough, learn together; these skills are the foundation for financial independence and stability.

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Setting goals, saving and investing

Setting financial goals is essential for building a secure future that weathers the ups and downs of life. Encourage your teens and young adults to set both short-term goals, like saving for a new gadget, and long-term goals, such as planning for college, buying a car, or renting their first apartment. Emphasize the importance of saving money and the power of compound interest, which can significantly grow their savings over time. Introduce them to basic investment concepts, highlighting the benefits of starting early to maximize returns. An adviser at their financial institution can help, or look for reputable online investor education resources from provincial securities administrators. Additionally, stress the importance of having an emergency fund to cover unexpected expenses and provide financial security. Teaching these principles early on helps them develop healthy financial habits and achieve their dreams.

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Credit, debt, and banking basics

The allure of their first, shiny card and the temptation that comes with swiping, tapping, or clicking it, means that understanding credit is essential for teens and young adults. Credit allows them to borrow money with the promise to repay it later, but it comes with responsibilities; while it can feel like free cash, it most definitely isn’t. Maintaining a good credit rating is crucial, as it affects their ability to get loans, rent apartments, and even secure jobs. Teach them about the potential pitfalls of debt, such as high interest rates, fees for not living up to the terms of borrowing agreements, and the long-term impact of carrying high levels of debt. Responsible borrowing means only taking on debt they can afford to repay and making payments on time. Additionally, show them how to open and manage a bank account, including using online banking, setting up automatic transfers to a savings account on paydays, paying bills, and understanding bank statements. These skills will help them navigate the financial world with confidence and avoid common financial pitfalls.

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Money Management Tips for Teens – Cheat Sheet 

Engaging teens and young adults in all-important money talks

To encourage teens and young adults to engage with you when you’re helping them learn about personal finance topics, it’s essential to make the information relevant to their interests and goals. For instance, if they want to buy a new gadget or save for a trip, show them how budgeting, saving and setting SMART goals can help them achieve success. Sharing your own experiences with money, both the highs and the lows, can make the lessons more relatable and impactful. Interactive learning through apps, games, and online resources can make learning about money fun and engaging. In addition, help your kids learn how to discern facts from fiction and avoid fraud. By creating an open environment where your kids feel comfortable discussing money matters, you can also help them feel more involved and invested in the learning process.

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Encourage questions and an ongoing dialogue for all things money and life-skill related so that you have an opportunity to influence their learning of key concepts before their peers take on this role in their lives. Demonstrating good financial habits in your own life sets a good example because teenagers are more likely to listen and learn if they see you practising what you preach. Finally, start early and be consistent by introducing financial concepts gradually and reinforcing them regularly. Consistent, ongoing conversations about money will help solidify their understanding and habits, setting them up for a financially successful future.

Financial Literacy Month Resources

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The bottom line on helping teens and young adults learn about money

November is Financial Literacy Month in Canada, and in its 14th year, the theme is “Money on your mind; talk about it!” This marks a perfect time to engage in meaningful money talks with your kids, teens, and young adults. You can explore free online resources together, attend webinars, engage with social media channels and personalities, and find personal finance experts that you will all learn from. Have some fun gaining money skills together and even challenge yourselves to a savings goal, like a 30-day savings challenge, ahead of the holidays. The lessons you and your kids learn, will last a lifetime.

Related reading: 

Tips to Teach Kids About Money 

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The 5 Most Important Things Young Adults Can Do for Their Finances 

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Peta Wales is President and CEO of the Credit Counselling Society, a non-profit organization. For more information about managing your money or debt, contact Peta by email, check nomoredebts.org or call 1-888-527-8999.  

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