Financial literacy is a crucial life skill that every young adult must acquire, as it equips individuals with the knowledge and skills needed to make informed financial decisions, manage money wisely, and secure their financial futures. As a credit union committed to empowering its members, especially the younger generation, HRCCU believes that financial education is a key aspect of its mission. No matter your age, valuable tips and resources offered by HRCCU can help on your financial journey.
Importance of Financial Literacy
In its most simplistic form, financial literacy is the ability to understand and apply basic financial skills. Practically, this means acquiring knowledge of concepts such as personal financial management, budgeting, and investing. For young people today, who are increasingly ending up with substantial debt due to student loans and credit cards, building financial literacy is more than just learning the basics of money management. It’s a powerful weapon for achieving independence as well as meeting financial goals now and in the future.
Building a Strong Foundation
Building a strong foundation in financial literacy is important because it serves as a protective shield against problems in the future and sets young people up for success as they age. By learning about financial essentials, such as budgeting, tracking expenses, and setting financial goals, young people learn how to manage their money, which increases the likelihood they will make sound financial decisions and avoiding overspending and living beyond their means.
Avoiding Debt
Debt is a huge problem in America, especially unsecured debt like credit cards. In fact, according to youth.gov, the average college student has $3,100 in credit card debt alone. Being financially literate means that young people are more likely to avoid the types of decisions and behaviors that lead to the accumulation of debt from overspending. Financially literate individuals can also discern between good and bad debt and manage the necessary debt they must take on, such as for vehicle or student loans.
Achieving Financial Goals
Financial literacy leads to proper financial management, which, in turn, helps young people meet their financial goals. For example, when you understand budgeting, you not only live within your means, but you also learn to set aside money each month to save for large purchases, such as a new television, rather than putting those types of purchases on credit cards.
Financial Independence
Finally, by ensuring that teens and young adults have a financial education, you build them up to achieve financial independence — meaning independence from you. As teens and young adults learn to earn, save, and responsibly spend their money, they build the types of skills they will need to live on their own and manage their households without making the types of poor financial decisions that lead to high debt and low credit scores.
Tips for Teaching Financial Literacy to Teens
Although the benefits of teaching financial literacy concepts to teens and young adults are clear, what to teach and how to teach it can be a bit more complex. Thankfully, there are a lot of great resources out there from trusted sources like the United Way Foundation, the Consumer Finance Protection Bureau, and even the FDIC. By following their tips and consulting other reliable resources that can help, integrating financial education for young people into family life and a broader educational curriculum is relatively easy.
Start Early
One of the best ways to ensure that young adults are financially literate is to start young. While explaining complex concepts such as investing and taxes to school-age children may be too much, it’s never too early to start the conversation about basics such as the value of money and being sure to set aside some money for savings and philanthropy.
Use Real Life Examples
Discussing the concepts surrounding financial products and money is a good start, but if you really want your lessons to stick with teens and young adults, it’s important to make them relatable through the use of real-life examples. This may include scenarios based on situations real people have faced or using their own lives as an example. Several apps, programs, and even good-old-fashioned spreadsheets are available to help a teen or young adult budget and set long term financial goals.
Begin with Budgeting
When it comes to financial basics, budgeting is the absolute foundation. Knowing how to build and follow a budget is the basis of every other element of proper financial management. Your budget is what tells you how much money you have coming in and going out, how much you can save, and where you may be able to cut back in order to meet your financial goals, whatever they may be.
Be Sure to Include Credit Education
Another critical aspect of a proper financial education is learning the importance of establishing and maintaining good credit. A person’s credit score is the foundation for earning access to most financial products, including eligibility for loans, qualifying interest rates for loans, and acquiring approval for other milestones, such as renting an apartment or home. Discussing not only the importance of credit but also how to build and maintain it is a fundamental aspect of any financial education.
Cover Investment Basics
Finally, once teens and young adults understand the basics, like budgeting and credit, the next step in their financial education should be how to grow their money through sound investment strategies. Whether money is needed for retirement or as additional income, investment basics that cover risk and reward as well as the value of using investment strategies to ensure long-term success are important elements of advanced successful financial management.
Resources for Teens and Young Adults
In addition to the web resources covered above, consulting a qualified financial professional, such as those at Hudson River Community Credit Union (HRCCU), is a great way to not only give your teen or young adult a financial education, but also start the conversation about more personalized financial goals and resources, such as youth savings accounts. Contact us today to learn how you and the teen or young adult in your life can become a member of HRCCU.
