Financial Literacy for Teenagers And Young Adults

Even if they take economics, most teenagers and young adults don’t develop financial literacy from school. That’s where parents and grandparents can come in. Helping your children learn about finances, and how to thoughtfully make appropriate choices, can help young people start their financial life off on the right foot. Here is a guide for encouraging financial literacy for teens and young adults.

THREE WAYS TO HELP TEENS AND YOUNG ADULTS DEVELOP FINANCIAL LITERACY

1. PROVIDE A FOUNDATIONAL EDUCATION IN FINANCIAL PRINCIPLES.

These are some core principles of financial literacy that every young person should understand. Parents and grandparents of teens and young adults can use these concepts as jumping off points to talk about important financial ideas.

• Compound interest. Teenagers might have heard that invested money earns interest, but learning about how interest compounds might be new to them. Helping a young adult understand how compound interest works is a powerful financial lesson. Investing their money wisely from an early age could set them up for lifelong financial security. Our video about the 10 vs. 30 Principle is a good illustration.
• Credit—how it works, and why it matters. When a young person gets their first credit card, they’re often warned to “be responsible” with it. But there’s a lot more that teens and young adults need to know about credit and the role it will play in their lives. Talk to them about the factors that affect their credit score, and the reasons why good credit will be important throughout their lives. Explain interest rates, and the benefits of paying off their credit card balance every month. Discuss the consequences of being irresponsible with credit cards, and use real numbers and time periods to make the lesson more tangible. 
• Paying for college. Include teens in conversations around paying for college. Whether you plan to pay tuition directly, use designated education specific funds through a 529 plan (or other savings plan), apply for student loans, or a mix of these, it’s important for students to understand what goes into funding education. Including them in these conversations can also help them make decisions about their education. That might be considering in-state or out-of-state schools, thinking about grad school, or if they want to take a gap year. If you expect your child to apply for student loans, make sure they understand the responsibility of that debt, and how they can make a plan to repay the loan. 
• Budgeting. Teaching teens and young adults how to budget is one of the most practical skills you can pass on. Start with the basics by helping them understand how to track their income and expenses. Show them how to categorize spending into needs, like groceries or rent, and wants, like streaming subscriptions or dining out. Then, work with them to set short-term and long-term savings goals. For example, they might want to save for a new laptop or start building an emergency fund for unexpected costs. By giving them a framework and showing how to prioritize their spending, you can help them build a sense of control over their money and develop habits that will serve them throughout their lives.

2. PROVIDE POSITIVE INFLUENCES AND RESOURCES

Social media is filled with financial advice. However, trying to piece together the seemingly limitless number of tips, tricks and conflicting influencer voices can leave a young person more confused and discouraged than before. 

TikTok and other sites are flooded with so-called financial gurus who share get-rich-quick schemes, tax “tricks” and other new financial trends that are too good to be true. Young adults are especially vulnerable to acting on bad financial advice they see on social media. In a 2024 survey, 37% of Gen Z respondents said that they’ve gotten in trouble from doing so (like with an IRS audit or other negative consequence).

So what’s the alternative? Become your kids’ go-to financial influencer! Keep the lines of communication open and encourage them to come to you when they have questions or concerns about money. Ask them about what financial advice they’ve heard, and from who, and help them vet those sources. Show them how you keep up with financial information and the economy. You can even introduce them to your financial advisor. Showing them that you rely on experienced professionals to help make informed decisions which can make finances less overwhelming.

3. CREATE OPPORTUNITIES FOR HANDS-ON MONEY MANAGEMENT

Young drivers must be supervised by licensed drivers while they get experience behind the wheel. They can also benefit from that same kind of supervision when they’re learning to manage money. Parents or grandparents can gift them small amounts of stocks to control (using a custodial account until they’re 18). Parents may also experiment with giving kids an allowance to manage each month. Rather than parents buying clothes, snacks and other incidental expenses throughout the month, let them make their own choices. This will help them start to align their spending with their values and priorities. 

GET EXPERIENCED HELP NAVIGATING FINANCIAL LITERACY

Sachetta’s financial planning advisors love working across the generations. We help parents, grandparents, and young adults create the financial strategies that match their stage of life and help build generational wealth. Have questions about building financial literacy within your family? Contact us today.

 George Liakakis, CPA, CFP® , MSA is Sachetta’s CFO and holds a Master’s Degree in Accounting from the University of Massachusetts Lowell. He is a licensed financial advisor. He focuses on both business and individual taxation, as well as financial planning.