4 Important Money Lessons Every Tween and Teen Should Know
In a bid to better equip young people with the skills and knowledge necessary for a financially secure future, the government added financial literacy education to the national curriculum in 2014.
Yet, according to research from the Money and Pensions Service, less than half of UK children have been taught about money either at home or at school . A recent survey of 15- to 18-year-olds by The London Institute of Banking and Finance found a 10% increase in demand for financial education . When asked at what age they wanted to start learning about money, 52% said between 11 and 14.
Given that financial education is lacking in schools, most young people see parents and family as the first port of call for financial advice.
By teaching your children about money matters when they hit secondary school age, you could foster lifelong habits that will set them up for financial security and success as adults.
So, read on to learn four important money lessons every secondary school-aged child should know.
4 powerful lessons to teach tween and teen children about money
There’s no need to set aside hours and hours for delivering complex financial planning lessons to your child. Your day-to-day routine will provide a host of opportunities for teaching them the most important lessons about money.
1. Learn the value of money
Many children are itching for greater independence when they reach secondary school age. This provides a great opportunity for teaching them the value of money.
A monthly allowance will help your child plan their spending. If they understand that when their money is gone it won’t be replenished until the next month, they’ll probably start spending more mindfully and possibly even begin to save.
Consider giving your children opportunities to earn their own money. For younger children, this could be as simple as paying them to do household chores. For teens aged 16 and over, having a weekend job is a fantastic way to learn about the realities of earning their own money.
Even giving your child a prepaid phone with a fixed monthly limit could help them to appreciate the value of money.
2. Understand budgeting basics
Budgeting is an essential life skill, and the basics are easy to learn, even for an 11-year-old child. Budgeting can be explained as simply as, “planning what to do with your money”.
Start by asking your child to create a list of needs and wants. What do they really need to spend on each day, week, and month? And what do they want to spend on to make their life fun?
Discuss how they can balance their needs and wants with their income, this could come from their monthly allowance, birthday money, or pay from a part-time job.
It may be a good idea to give your child or grandchild a regular allowance. Having money of their own can allow them to make independent decisions about how to spend it.
Finally, involve them in budgeting for everyday events like food shopping. This can be a great way to help them to learn the value of budgeting and gain a better understanding of how far money will go.
3. Start saving and investing
One productive way to teach your child about saving and investing is to open a Junior ISA (JISA) in their name and start making regular payments.
The top-paying Junior Cash ISA currently pays 5.5% interest and you’re allowed to deposit up to £9,000 each year (2023/24) . According to a report in This Is Money, paying £55.50 a month into a Junior Stocks and Shares ISA from birth would build a savings pot of £18,000 by the time a child turns 18 (based on monthly contributions into a JISA account, with a projected growth rate of 5% a year).
When your child is old enough, involve them in making decisions about their account and help them to identify savings goals, such as building up spending money for a family holiday. This may help to motivate them to save.
Remember, when your child turns 18, they assume full control of the account and can choose to either roll the money into a regular ISA and keep saving or spend the balance as they wish.
Setting up a JISA is also a great way to help your child learn about compound interest. This is the principle that savings earn interest on both the savings themselves and on the interest they accrue. So, by earning interest on interest, savings can rapidly grow.
Great news! However, this also applies to borrowed money. So, be sure to also explain the problems associated with compound interest on debt.
4. Know how to manage debt
Borrowing money is part of life for many people. From mortgages to student loans, debt can take all forms and it isn’t inherently “bad”.
However, debt can quickly snowball if it isn’t managed effectively.
Teaching your children how interest on debt works, and helping them to understand the different types of credit available, could put them in a better position to manage debt sensibly.
For younger children, learning that getting into debt will probably mean paying back more than they borrow is a good place to start. You could talk with them about how they might budget for this and how they could avoid getting into debt in the first place.
Older children, that is, those who will soon be eligible for credit, may benefit from learning about terms such as Annual Percentage Rate (APR) and secured versus unsecured debt. This could help them make smart financial decisions such as when to use a credit card or overdraft, without letting debt spiral out of control.
Getting to grips with the most important money lessons will set your children and grandchildren up for better financial planning in the future. And we’re here to help.
Get in touch
If you’d like to help your child or grandchild with their financial education but have questions of your own, please get in touch to find out how we can help and support you.
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The information contained in this article is based on the opinion of Aspira and does not constitute financial advice or a recommendation to any investment or retirement strategy.
The value of your investment can go down as well as up and you may not get back the full amount you invested. Past performance is not a reliable indicator of future performance.