Managing finances is an inevitable part that surrounds all our lives. If not today, then tomorrow it will be an unavoidable part of every teenager’s life. Educating teens and young adults about finances is important to ensure they lead an informed life now and later. While often sidelined as not mandatory, smart money habits for youth can help build a strong foundation when they transition into their professional lives.
You will be surprised to know that less than 30% of people in India are financially literate. The education on money management for young adults can be done in a variety of ways.
This article aims to educate you on the importance of financial literacy for teens and young adults together with some effective ways of doing so.
Why is financial literacy important for teens and young adults?
A host of benefits are accrued from youth financial literacy. These include:
Empowering young minds in finance leads to overall empowerment and better opportunities for independent functioning. This assists them in leading a more informed life and planning their future efficiently concerning savings, investments, loans, and taxes.
Another direct benefit resulting from financial literacy is better debt management. It helps teens and young adults successfully manage situations of financial crisis in the future and educates them to build valuable assets in the present.
Saving and investing for teens helps them build good financial habits for the future. It assists them to stay aware, manage their finances, and stay out of unnecessary spending.
Top 6 lessons for financial literacy for teens and young adults
Here are some valuable financial tips for teens and young adults to help manage finances better and learn about the new things they are yet unfamiliar with:
1. Differentiate between needs and wants
Identification of needs and wants is the basic building block towards living a financially enlightened future. It is crucial to understand the difference between the things without which you cannot manage your life, your needs, and the things that you aspire to have as a desire, your wants. Consider, for example, food and housing are your needs while spending on a new luxurious dress could be your want.
Differentiating between these two will help enhance the budgeting skills of young adults. They can distinguish between the amount they necessarily need to send and the one they do out of desire.
2. Do not live on your paycheck
As teenagers, the zest for spending money is a lot, and spending all one gets in the paycheck is attractive. However, this cut-to-cut living can leave people in a stressful situation. One essential component of teaching teens about finance is encouraging living below their means.
Taking out a portion of the earnings each month is integral to building a safety net and also allows scope for flexible income. We recommend activities like living in affordable housing, cooking meals at home, etc. With this habit inculcated, individuals can build a strong foundation through early financial education.
3. Set saving markers
Together with the possibility of an income flow comes the possibility of savings. It is integral to teach youth to set saving goals from the start as a part of financial education for teens. Saving creates a safety net for emergencies and allows better spending management.
For example, vacation spending from one month’s income will be difficult. As against this, saving for months can help manage it efficiently without financial stress. Inculcating the habit of saving a fixed percentage of the salary from the beginning can be helpful later.
4. Build multiple sources of income
There can be ups and downs in the beginning years of building a career. We recommend being on the lookout for multiple sources of income to reduce the blowout from these mischances. It is the ideal time to start looking up alternate earning sources from activities such as pet sitting or blogging.
Further, pursuing one of the hobbies can also build a source of income to carry on for the life ahead. Now is the time to look up alternate income avenues and move towards youth financial empowerment.
5. Learn about taxes
It might be disappointing to many, but there is a gap between the gross pay and the net pay. Teen financial literacy programs must teach them about this difference and the different aspects of tax paying. With the income, there is also an obligation to pay the government a part of the income. It affects the actual income, so the personal finance for teenagers depends on this component as well.
Since taxing takes away some part of the paycheck, it is an essential component to consider while budgeting.
6. Seek financial literacy
While these are some practical finance tips for young adults, we advise investing time to learn about financial concepts.
There are many youth financial literacy resources, such as courses, teen financial workshops, and more. Learning about budgets and taxes can be helpful and fun. And this is more than fun as learning how to manage finances is a lifelong useful skill.
Building a sense of teen financial responsibility is extremely important to make them enlightened and responsible adults with efficient financial planning. Empowerment, debt management, and good financial habits are the primary reasons that make financial literacy for teens and young adults mandatory.
The aforementioned tips can help teenagers get a better grip on their finances from the beginning and use the youth’s financial literacy resources to their benefit. To learn more, visit Stockgro.