Money tips for teens and young adults
Every parent wants to know that when their child is ready to fly the nest, they have enough financial knowledge to handle whatever life throws at them.
But playing your part in that is key, say experts – especially if you have teenagers or young adults still living at home.
“Financial literacy for teens is especially important because when it comes to money, we’re creatures of habit – and the earlier we instil good habits into our children, the better,” says Natasha Janssens, Money Coach and Founder of Women With Cents.
And given they don’t really learn financial basics at school, what you do as a parent is front and centre, she adds. “The way we make financial decisions is more emotional than logical, so it’s about being a good role model around money management. What we do is a lot more powerful than what we say.”
Let's talk money
Not in the habit of talking about money in your family? You’re certainly not the only one – if money conversations were taboo during your own upbringing, you may have brought that into your own family dynamic. But it’s never too late to start.
“You don’t have to become a finance expert overnight, but talking to your teens and young adults about money, showing them how to pay a bill, talking about how you’re deciding between making an expensive purchase or going for a cheaper one, or even how you’re applying for a home loan,” explains Janssens. “You’ll be amazed at the conversations that emerge once you start, and in doing so you’ll be helping your kids with a much easier transition into adulthood.”
The downside of poor financial literacy
As adults, we’ve all made our mistakes when it comes to money management – perhaps by maxing out a credit card or two! But what happens if your young adults fly the nest without any real money knowledge under their belts?
“If you lack financial literacy when you leave home it can leave you with a more short-term focus with your money,” says Janssens. “That might mean you’re more about having fun in the moment and less about planning for tomorrow. It may also leave teens and young adults more susceptible to being taken advantage of, whether that’s by lending other people money, or taking out risky investments. The good news is, it’s never too late to learn about money and change your financial habits.”
6 good money habits to teach your teens and young adults
1. How to control your money
“In the age of Tap’n’Go, grasping the concept of money and how it works can be difficult, so starting with a bank account that your teenager can access and control – at 14 they can open their own,” says Janssens. “This is usually the time they’re getting their first job and earning money of their own, so teaching them how to think through their financial decisions will give them a really solid foundation for the future. If your children don’t have control over their money until they’re older, they may overspend as an adult or develop a belief that they can’t be trusted with money which can become its own form of self-sabotage.”
2. How to stick to a budget
If your teens are at an age when they can work out a budget, show them how your household budgeting works. You could write down an amount of money each week on top of an A4 piece of paper, stick it on the fridge and then jot down each expense that’s deducted from that amount, like groceries, bills, coffees, rent. “Kids are visual learners and it’s helpful to teach them the basics, plus modelling how we do it,” says Janssens, “and you’re teaching them about conscious spending.”
3. How to delay gratification
“Prioritising our needs tomorrow over our needs today is something we’re not biologically wired for, and teaching kids about delayed gratification in today’s tech age is extremely important,” says Janssens. “A key lesson is to let them run their own race and develop self-confidence, so they don’t feel the need to keep up with their friends on what they spend their money on.” She advises supporting your children to set their own money goals and then facilitating the conversation around what they want to buy or save for (movies, or put it towards the car they want?). “The challenge as parents is learning to step back and not solve their money challenges, but encourage resourcefulness instead.”
4. How to save and grow your money
Compound interest is something teens and young adults can definitely grasp, says Janssens. “And by picking goals they’re excited about, you can easily get them interested in compound interest. Teaching them how to set aside a small amount today and let it grow in the background is key; they can still enjoy their youth but have something to fall back on. Moneysmart’s compound interest calculator is a great one to have a play with, to show how much you might have in 10 or 20 years’ time if you start building a nest egg and contribute just a small amount each week.”
5. Start young with super
“This is a really important asset for younger generations, in particular because we have an aging population,” says Janssens. “It’s unlikely our tax system will be able to support an aged pension in the future, and for young women the pressure to take care of their super is even greater, due to the combined effects of the gender wage gap and prolonged career breaks if they decide to have children. Teaching them to look after their future selves is key to protecting them, but I’d suggest starting with a more tangible goal to begin with and building from there.”
6. How to invest wisely
Investing when you’re young can be a great way to grow wealth but there’s a fair amount of knowledge and legwork involved. “There are many investing apps aimed at young people and they’re growing in popularity,” says Janssens. “While they can be a great tool, it’s important to do your research. If your teens are older and can understand the concept of investing, a safe starting point is the ASX Sharemarket game – a free tool that allows them to experience investing without using any real money.”
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This information is general in nature and has been prepared without taking your objectives, needs and overall financial situation into account. For this reason, you should consider the appropriateness for the information to your own circumstances and, if necessary, seek appropriate professional advice.