Helping your teens build financial confidence

Helping teens gain financial confidence could be key to their future success. It doesn’t have to be overly complicated, often just talking openly with your children or grandchildren about your approach to budgeting, savings, and investments, can help them learn valuable financial skills for life. Don’t worry, they’ll thank you in years to come.

To get you started here are seven top tips.

1. Share real-life examples

Use your own financial experiences – or simplified scenarios – to show how income and expenses work together. This helps teens understand budgeting in practical terms and see how choices impact financial stability.

2. Encourage saving for a rainy day

Encourage teens to start saving early and regularly – whether it’s pocket money, a part-time job or gifts. Even a small sum is a great way for them to learn the value of money, that it doesn’t grow on a magical tree, and is unfortunately a limited resource.

While it may seem we live in a buy-now-pay-later society, encourage them to start saving for future goals – teach them financial responsibility. And don’t forget it’s advisable to always have an emergency fund to help in unexpected situations.

3. Decode their first paycheck

When your teen starts earning, help them understand what’s on their payslip, and what to expect in future, when they may be earning more. Explain deductions like tax and national insurance. And talk about how to allocate earnings – especially the importance of saving a portion regularly, maybe even a percentage of their wage.

4. Teach smart borrowing

Introduce the concept of credit and debt early. Discuss when borrowing makes sense (and when it doesn’t), how interest works, the importance of maintaining a good credit score and the potential pitfalls of not repaying a store or credit card, or a loan on time.

If they’re considering student loans, walk them through the terms and repayment expectations to demystify the process.

5. Introduce investing

Introduce teens to the basics of investing and how it can help grow their money over time.

Explain the risks, that the value of any investment can go down as well as up, so they might not get back the amount they put in. However, assuming the value of investments rises over the long term, over 10 years, even if only in line with inflation, the compounding effect can be very strong. The earlier you start, the more your money could grow over time.

Help teens explore investing by setting up a Junior ISA or a personal pension for them which allows contributions from parents and grandparents. When they turn 18, they can also contribute to their pension, although access to these funds is restricted until later in life. Encourage small monthly contributions and explain how different investment choices work. Matching their contributions can make it more engaging and show the value of consistency.

6. Motivate them to set financial goals  

Ask them what they’d like to save for – both in the short and longer term. Whether it’s saving for concert tickets, a new mobile, university, a car or a gap-year round-the-world ticket, having clear goals can motivate them to save and manage their money wisely.

7. Talk about financial news together

Discuss what’s happening in the financial news. Bank rate and inflation changes, for example, financial market movements, government budgets, regulatory and tax changes and how they impact you.

Also, explain how both UK and global events – such as Brexit, Covid pandemic, Russia’s war on Ukraine, and Trump’s tariffs – impact the economy and people’s finances.

Show how major economic events affect everyday life – some families may struggle during downturns, while others benefit in good times. Also, discuss the value of financial responsibility and giving back, encouraging teens to be both financially savvy and socially aware.

Building financial confidence

Helping to build financial confidence in your teen is a gradual process, it won’t happen overnight. But be assured that your efforts will reap rewards as money management is a life skill which could make a significant difference to their future.

So if you have any questions regarding talking to your teens about money, get in touch with your financial adviser. They’re here to help educate and build financial confidence in the next generation as well.

And if you have friends or family, who have children or grandchildren in their teens, feel free to share this article with them.

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