Teenagers and Financial Preparation

By: Qingqing Ouyang (‘23)

Many schools do not offer opportunities, besides specialized business classes, that prepare students as they enter adulthood. In this case, it means teaching the youth to save and manage money. In a class known as personal finance, teenagers can learn how to properly handle money situations, which will help them a lot in the long run. 

To a parent or guardian—These lessons are important to teach your child now. Instead of waiting until they graduate high school, teaching your teenagers how to prepare financially before can save them a great deal ahead. In this article, we will talk about three simple tasks your teenager can learn now! If done now, these tasks will prove to be very beneficial as your teenagers grow up to be more independent. 

First, setting financial goals and plans is a good outline for personal finance. Saving up for a particular good or service, rather than spending money randomly, will limit bad spending habits in the future. Additionally, managing where the money goes every time you earn it is also an essential skill. For example, you can organize your money into three categories: savings, spendings, and investments. Remember, these categories are up to you! You can choose what you wish to split your money into, and the amount can also vary. Some might want to put 50% of earnings into savings, 20% into investments, and 30% into spendings, but others will choose differently. Ultimately, managing your money as a teenager will help develop good practices and will also allow you to track your spendings while correcting any mistakes. Remember, making these mistakes as a teenager will be less costly than making them as an adult. that will not matter as much in comparison to when you are older. 

Secondly, opening a Roth IRA for kids or teenagers is another action to take in regards for preparing for the future. A Roth IRA is essentially a retirement investment savings account, where people can invest in money for retirement. The more time and money you put into the Roth IRA, the more money you will have by the time you retire. Although many people create a Roth IRA when they start working, there are more benefits to opening one at a younger age. Because a teenager is fairly young, the amount of time will add up and exponentially benefit the retirement savings. In other words, the earlier the parents can set up a Roth IRA for the child, the likelier the child is to become wealthier later on. Of course, the parents would need to input a certain amount of money monthly because the child may not have an income. For teenagers, talking to their guardians would be a great choice in preparation for the future. 

Lastly, going back to the first and second points, investing is also something younger generations can explore. While it might seem risky to allow a teenager to invest, it actually allows them and to learn about the markets and economy from a realistic perspective. Of course, for teenagers, doing research on good investments and getting permission from your guardian is the first step.

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