Learning how to manage finances is an important life skill for teenagers to develop as they grow into adulthood. However, teaching teens about money can often feel like a daunting task. Using real-world examples that are relatable to their lives can be an effective way to engage teens and help them grasp fundamental financial concepts. This article explores practical tips for both parents and foster carers on teaching teens financial literacy through real-world learning.
Start with Basic Budgeting
One of the first financial lessons for teens is budgeting. Have them track their expenditures like clothing, entertainment, snacks, etc. for 1-2 months. Then, sit down together to categorise these expenses and create a simple monthly budget based on income from allowance, gifts, part-time jobs, etc. Compare wants versus needs. Discuss building savings into the budget and how to balance spending and saving. Use their actual spending data to make the budgeting exercise realistic.
Open a Bank Account
Opening a bank account can provide hands-on learning about how banks work. Teach teens how deposits, withdrawals, interest, online banking, debit cards, etc. function. Let them monitor their account balances and transactions. Consider linking their budget to the bank account by depositing their allowance directly. With supervision, give them the freedom to manage their accounts to understand real-world banking. If you are fostering teens with an agency like FCA Scotland, make sure to check with them before opening any accounts in their name.
Introduce Responsible Credit
Credit cards are a part of adult finances, so introduce teens to credit responsibly. Discuss concepts like interest rates, credit scores, reading statements, paying bills in full each month, etc. Consider adding them as authorised users on your credit card so they can get used to tracking spending without taking on debt in their name. Supervise online account access to monitor charges.
Apply for First Job Together
The job search process provides practical lessons in wages, taxes, deductions, direct deposit, etc. Walk through the steps together – building a CV, filling out applications, interview prep, understanding pay stubs and tax forms. Discuss saving and spending decisions with their first earned income.
Add Financial Realities to Adult Decisions
Involve teens in big financial decisions as a learning opportunity. Discuss things like monthly mortgage payments, saving for a family holiday, paying off loans, retirement contributions, etc. Explain the thinking behind important money decisions to demystify adult financial responsibility.
Make Lessons Entertaining
There are many ways to add an engaging twist to financial literacy. Play money-centred board games, have teens “invest” in the stock market using fake money, compete in business proposal contests, or create a financially themed TikTok challenge. Creativity and fun will get teens more invested in learning.
Equipping teens with real-world financial skills prepares them for adulthood. While teaching money management can feel daunting, using tangible examples from their day-to-day lives makes lessons relatable and effective. Track spending, open bank accounts, demonstrate wise credit use, include them in job and adult money decisions, and add creativity. These practical tips will help build financial literacy and set teens up for a bright future.
