What is financial literacy? Financial literacy is the ability to comprehend and apply knowledge about finance in your daily life, such as how to earn, invest, save, and spend.
Financial literacy is very important not only for adults but also for teens in order to budget, and understand the financial world around them, and how to manage their lives, including good and bad debt.
With the average 18-23 year-old American starting off with around $10,000 of debt, it is vital that we teach the next generation financial literacy (DeMatteo). Things like paying off all your credit every month and budgeting do not even cross the minds of most adolescents. Simple ways that parents try to teach financial literacy at home include a piggy bank, pocket money, and maybe having their child manage their own debit card. This is a good way to introduce teens to different monetary systems, but is this enough? What about taxes on earnings, the actual cost of living, the real cost of owning a car, and the concepts of insurance and credit cards?
Schools teach math, but students are not taught concepts of finance and investing. Economics and global markets and economies are not subjects that are typically taught until college, so many teens don’t understand how much of an impact these might have on their lives–for example, how recession and inflation might impact their chances of getting a job after college.
This can all be changed. Some states like Arizona already require a class in economics. Some schools could include social programs that teach the basics of finance, and teens could set up finance or investment clubs to explore and learn the basics of finance. There are many simple ways to help augment financial knowledge including free classes on the Internet from reputable financial companies, such as Fidelity Investments, Charles Schwab, and Merrill Lynch. Teens can also invest money through a teen investment account, get a summer job, or ask their parents or other financially literate people about what credit and other difficult financial concepts are (Caballerom).
These ideas can greatly benefit all teens because by practicing these methods from a young age, they will greatly increase their financial literacy and overall financial knowledge as they become adults, ultimately leading to more financial security and success in the future.
Citations:
Caballerom, R. (2023, September 7). Retrieved November 23, 2023, from Arizona PBS website:
https://azpbs.org/horizon/2023/08/the-importance-of-teaching-financial-literacy-to-teens/
DeMatteo, M. (2020, October 16). The average American has $90,460 in debt—here’s how
much debt Americans have at every age. Retrieved November 23, 2023, from CNBC
website: https://www.cnbc.com/select/average-american-debt-by-age/