For many students returning to high school this month, the typical curriculum usually includes classes like Math, Science, and English, mixed with some elective classes students need to take to meet graduation requirements. What usually isn’t included are personal finance classes. According to a report from April 2023, only 18 states guarantee a form of personal finance education before graduation. Lori Lennemann, Fair and Responsible Banking/CRA Officer at First Bank, said, “The importance of financial education is universal. Every person in the world will have to deal with money in their lives. Money management is a basic life skill; thus, financial education is fundamental to a well-rounded education for every student.”
To help you get started, here are some financial areas to consider teaching your teen.
1. Credit scores
Your credit score is an extremely important part of your financial life. As your child grows older, they’ll likely want to purchase their own car, get a credit card, and rent or purchase their own living space. In all these situations, your credit score will be used to determine your creditworthiness and how likely it is that you’ll make your payments on time.
Is your teen ready to start building credit? Read Building Credit for Young Adults.
2. Budgeting
We know you’ve heard how important budgeting is before, and that’s especially true for teens who are starting to make and manage their own money. Help your teen understand what bills they are responsible for, whether that be gas for their car, their cell phone bill, or car insurance. Once those bills are accounted for each month, help them determine an appropriate amount of “fun money” and consider putting the rest into a savings or retirement account.
3. Emergency funds
While an emergency expense as a teen might not seem stressful, it’s important to help your teen understand the purpose of emergency funds.
4. Retirement planning
Something teens might not think of often when they’re younger is planning for retirement. The earlier your teen can get started saving for retirement, the better off they’ll be when it’s time to retire. Consider opening a Roth IRA for your teen and meet with a Wealth Management Advisor to determine an appropriate amount of funds to contribute based of their current income levels. With Roth IRAs, you’ll be contributing after-tax dollars so your money will grow tax-free.
5. Checking and savings accounts
Another important part of your financial life is to understand the importance of checking and savings accounts. Checking accounts are beneficial for teens because they can provide easy access to their money for everyday needs, like gas and food. Make sure your teen sets up direct deposit with their employer, so they have immediate access to their funds on payday. On the other hand, a savings account can help your teen start saving for larger purchases they will need to make in the future. Both checking and savings accounts can help keep your money secure, so the sooner you establish these accounts, the better.
Teaching your children about finances and how to manage them is critical in helping them form responsible money management habits for when they are older. Although financial education might not be taught at your children’s school, it’s just as important as the other core subjects they are learning. For more information on how First Bank can help your family reach their financial goals, contact a trusted First Bank representative.