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Youths often need help navigating the waters of personal finance. Trust me: You don’t want your kids to learn about finances from self-proclaimed financial “experts” on TikTok. There are much better ways to help children develop the money management skills they need. But what do they need to learn before adulthood? And how exactly can they learn the skills they need? Let’s review the top financial skills kids need to develop and how they can do so.
How to teach teens financial skills
Schools should incorporate financial literacy into their curriculum to shape a financially responsible and knowledgeable generation. But you generally can’t rely on schools to give children all the financial knowledge they need. It’s not the teachers’ fault—many schools simply aren’t required to teach financial literacy! While you can (and should) encourage schools to teach financial concepts to correct this issue, parents must lead the way for now. Parents can teach their kids about finances through digital resources and hands-on experience. More money management and financial apps are geared toward kids than ever. Just don’t entirely rely on those apps to teach your kids—also, have open discussions with them about money matters and monitor their monetary transactions.
Financial literacy concepts teens need to learn
The more financial skills kids learn, the better. A few of the top financial literacy concepts they should be introduced to include:
- Budgeting
- Investing
- Credit building
While some of these concepts might seem too advanced for minors, there are ways to introduce them slowly in age-appropriate ways. Kids shouldn’t just be given access to a parent’s credit card and brokerage account. Instead, they should use financial cards, accounts, and resources designed specifically for children.
Budgeting
Kids and teens should certainly be allowed some spending money, but they must also learn to allocate money to savings and investments. By encouraging teens to save some of the money they earn from their part-time jobs and allowances, they can develop a sense of financial independence and security. You want to teach kids to avoid overspending and accumulating debt and to resist impulse purchases. You can also stress the importance of charity by having them set aside money for a cause that resonates with them. One of the best ways to help children budget and improve their money management skills is through a kids’ debit card. The best free debit cards for kids and teens come with parental controls and savings tools—even the ability to invest or build credit.
Investing
Investing isn’t just for adults. Teens and even younger kids can start investing with the help of a parent or guardian. Hands-on investing experience is an invaluable way to help children develop the investing skills they’ll need. Also, thanks to compounding returns and a long investing horizon, investments made as a child or teen have the potential to grow substantially by the time they reach retirement age. They don’t have to deal with drab and overcomplicated parental brokerage accounts. Investing in apps for teens makes the stock market fun and helps educate your youngster.
Credit building
People don’t get credit scores until they become adults, but they can build their credit before they turn 18! Establishing a credit history at a young age will make it much easier for a child to get an unsecured credit card, car loan, mortgage, and other major financial lifelines in adulthood. One way to help children establish credit is by adding them as authorized users on one of your credit cards. Just having the name on the account works—you don’t have to let them use the card. (But beware: If the primary cardholder misses payments or frequently makes late payments, it could harm the kid’s credit.) In a few rare cases, kids’ cards can help a child build credit—and they’re a much safer method.
Final thoughts
To help kids learn essential skills like budgeting, investing, and good credit-building habits, adults must give them the necessary tools and hands-on experience. In today’s digital world, that means putting financial apps at their fingertips and watching as they become as financially savvy as they are digitally savvy.
Author Riley Adams, CPA is also the founder and CEO of Yati Media, LLC dba Wealthup.