Back to school is here. One subject that you do not often find in the curriculum is financial literacy. But the importance of financial literacy for teenagers cannot be overstated. Learning and practicing smart financial thinking is the foundation of good personal finance and has a lot to do with habits that teens and young adults can work on. Clever Girl Finance offers some fantastic tips. Let us share some of them here:
1. Figure out your needs vs. wants
When it comes to financial literacy for teens, one of the most essential lessons is learning the difference between needs versus wants.
Although this might sound easy on the surface, it can be challenging to truly separate needs from wants when creating a budget. That is because needs vary a little bit based on the person.
A few basic needs include food, housing, transportation, and health insurance. Wants might include things like a new dress or an exotic vacation.
But sometimes the line between wants and needs gets blurry. For example, you might need a car to get to work. However, that does not mean you need a luxury sports car.
So, learning how to determine what you want versus what you actually need is one of the most important lessons in personal finance for teens.
2. Live below your means
It is tempting to build a budget based on your paycheck. But paycheck to paycheck living makes for a stressful money situation. Instead, make it a point to live below your means from the start.
A few ways to keep your expenses low include living with a roommate, cooking at home, and finding affordable hobbies. Living below your means will help you save more money and prevent you from not having money!
3. Set savings goals
Financial literacy for teenagers starts with understanding the importance of saving.
You can set savings goals for about anything. Whether you want to build an emergency fund or save for a vacation, setting a savings goal is a good idea.
When you set a savings goal, break it down into smaller steps. For example, let us say that you want to spend $1,000 on a vacation one year from now. You would need to set aside about $83 per month to make that a goal a reality.
With this breakdown, you can make room in your budget to achieve the goal. Consider using a savings goals calculator to map out your progress.
4. My personal favorite under-utilized tip: Learn what is good debt and bad debt.
A key piece of financial literacy for teenagers is learning how to evaluate debt. A debt of any kind can be a drain on your finances. But in some cases, taking on ‘good’ debt is a necessary choice.
Many consider student loans to be a ‘good debt’ because a degree can open the door to higher earnings. However, it is important to weigh the costs of your degree against the future earning potential that comes with your particular degree.
Make sure to explore your earning potential before choosing a particular degree. Even if you decide that your degree is worth the cost, consider pursuing scholarships and working as a student to minimize the number of student loans you need. Also, consider choosing a career path that does not require a degree.
To read the complete article and find more clever tips, go to https://www.clevergirlfinance.com/blog/financial-literacy-for-teenagers/