Building financial literacy programs for teenagers through institutional partnerships

Teenagers & Money

Teenagers and Money

It is imperative that we reach out to young teens in order to give them the skills necessary to achieve fiscal responsibility for a life time of paying bills. In order to do this I would establish seminars that students could attend for free in order to gain the necessary knowledge and skills to be financially independent. I would recruit banks and other financial institutions in order to help in this endeavor. Because these institutions have an inherent interest in creating financially responsible citizens as future customers, I believe they could be easily convinced to do this.

The transition from living under parents' guidance and protection is a big step, both psychologically as well as financially. It is important early on to think about how to prepare for a lifetime of financial independence and planning, so as to be able to achieve one's personal goals and avoid making costly mistakes that can bury them in debt and may take years to overcome or even lead to a disastrous financial future. It is therefore essential to provide young adults with an appreciation of the importance of financial responsibility, along with some basic money management guidance and information.

Many young adults usually learn some basic principles of financial management from their parents, both through explicit guidance, observation, or ideally having had already some minor hands-on experiences (e.g. through weekly allowances to buy lunch, for example, or supplies). Others have already held some minor part-time jobs and therefore learned how to manage that income. Additionally, basic personal financial management skills may be learned in different ways, for example by reading books, magazines, and browsing the internet.

Ultimately, however, a well balanced financial life will depend on how well the teen manages his or her own lifestyle and budget, including an understanding of basic accounting principles (incoming funds minus outgoing expenses during a given time period). This requires the teen to understand how much money they realistically have available, and make an accurate assessment of what their expenses will be and how these will be covered. It is also about learning to set priorities, and sometimes sacrifices, trade-offs or cuts in order to keep a positive balance at the end of the week or month after having paid-off all expenditures.

To assist the teen, I would start off by an explanation of the various categories of income and of expenses. If the teen plans on studying at a college their income would consist of scholarships, grants, money provided by their parents, and possibly some type of part-time job or income yielding work. Expenses would be bills, such as rent, utility bills, food and beverage, college tuition fees, books, supplies, grooming expenses (e.g. haircuts), clothing, medical bills, transportation to include possibly car related expenses (gas, insurance, repairs, etc.), and extras. It would be also necessary to plan contingencies, and keep a small reserve of savings just in case. Expenses always tend to be higher than one plan for, and things can happen that are unpredictable, such as medical emergencies, travel, or other. The following is an explanation of the way I would reach out to teens to help them prepare for their financial future.

Three Basic Financial Activities

Saving & Investing

Saving and investing is an extremely important element of personal financial management that is often overlooked. The first rule is to spend less than you earn. Think of saving as a bill paid to oneself. You are making payments for your future, to enable you to buy a home, send your children to school, and accumulate sufficient financial resources for an enjoyable retirement. A good rule of thumb is to save10% of your take home pay. Put this money in a savings account, or invest it. The main thing is to start now. The younger you are when you begin saving and investing, the greater your advantage.

Budgeting