Chances are your teen doesn’t even know it’s Financial Literacy Month. After all, it doesn’t exactly have the same shine as the holiday season, and there isn’t even any cake involved. Regardless, April has been nationally designated Financial Literacy Month for a reason: Learning how to handle money is an essential part of growing up, and as many moms and dads know, initially learning responsible financial habits can be a bumpy ride, and requires practice.
What is financial literacy?
According to the National Financial Educators Council, financial literacy is defined as “possessing the skills and knowledge on financial matters to confidently take effective action that best fulfills an individual’s personal, family and global community goals.”
Put in everyday terms, financial literacy is all about understanding how money works, how it should be handled and how to hold onto it.
Knowledge is key
Would you give your teenager the keys to your car without ever teaching them how to drive? Unless you’re looking to bring on a heart attack, the chances of that happening are slim to none. However, plenty of parents the world over allow their children to get behind the wheel of their own personal finances without a single lesson in responsible money practices.
Just as young drivers need to be taught about stop signs and speed limits, young consumers need to learn about saving and spending. Unfortunately, there are many more driving schools out there than personal finance schools. This means it’s ultimately up to parents to get the job done. Arming teens with money handling knowledge can help them make more informed decisions, giving them important skills they can carry into the future.
The basics of financial literacy
When it comes to focusing on financial literacy, there’s no need to pull out the chalkboard. The fundamental building blocks of financial responsibility and knowledge are easy to learn, and even easier to pass on.
According to Statistic Brain, as of 2012, there were 25.6 million teenagers across the United States. Of this number, only 40 percent of those surveyed said they were actively saving. Whether they want new clothes, a car or to go to college, that means many teens don’t see or understand the value of putting money away for both short and long term goals.
Financial Literacy Month is the perfect time for parents to broach the subject of saving with their kids, and talk about how important it is to their future. And while some teens may roll their eyes when mom and dad try to tell them about the significance of saving, bargain-hunting, planning ahead, budgeting and generally making more informed decisions when it comes to money, it’s likely they’ll become much more interested when it concerns them directly.
Does Johnny want his own car when he turns 18? It’s time you sat him down to talk about how he’s going to save up for it. Is Suzie dreaming of an expensive prom dress for next year? Now’s the time to discuss her getting a part-time job.
Besides saving, there are numerous financial fundamentals parents can pass on to their teens. For instance, smart spending habits, the importance of avoiding debt and the value of budgeting are all lessons that will not only help teens in the present, but provide benefits for the rest of their lives.
One way for parents to make sure their children are learning these lessons is to invest in a prepaid debit card which allows parents to keep track of their children’s spending habits. Prepaid cards can be used like cash, but they also allow parents to find out where and how much money is being spent, as well as giving them the opportunity to put a freeze on it.
In the end, Financial Literacy Month is an annual reminder for everyone to think about their financial health. It’s also an opportunity to open dialogue with your teen regarding his financial future and to show him the importance of smart financial decisions. Parents, don’t let this opportunity go to waste.