5 Tips to Teach Personal Finance to Teens and Young Adults

Photo by Kelly Sikkema on Unsplash

As I am setting up my classroom for the new school year, I realize I have what seems to be an impossible task on my hands. I am teaching introduction to personal finance to freshmen. These are young kids who haven’t even had their first jobs yet. Many are clueless about paystubs, loans, insurance, and even savings. Many know the term and have a general idea, but don’t know how they operate. 

In this guide, we’re sharing 5 tips to help you teach your teens and young adults personal finance. They include: 

  1. Hands-on experience
  2. Explaining why savings is important
  3. Money management strategies
  4. Spending habits, curb impulse purchases
  5. Why credit is so important

Each teen is different but they are all, as freshmen, facing the reality that young adulthood is upon them and their job hunt will start sooner rather than later. With these 5 tips, it’s easy to help them develop into young adults who are conscious and understand the value of money. 

1. Hands-on experience. 

Teens learn best when they get to experience things firsthand. I am not suggesting that you hand them your credit card and let them go shopping. What I am suggesting is that you have them track where they are spending their money. Did they really need that new article of clothing or would it have been wiser to spend that money on school supplies? 

Have them create a budget for their back-to-school supplies. Budget out their monkey allowances on concession food at sporting events, and even that money they like to sneak from your wallet or purse for their Saturday night movie. What about gas money, do they know how much they are spending, or are they just charging it to an account?

In a classroom setting using simulations, having a classroom store, or having student organizations run concession stands or fundraisers are great ways for students to get hands-on experience with money management. As a business teacher, this is key because it helps them see all the work that goes into running a business. 

2. Explain why savings is important.

Teens are impulse shoppers, let’s be serious about this reality. If they have $2 in their pocket and just happen to be at Dollar Tree they will be coming out with $0.50 depending on tax amounts. They don’t “need” the number of things they think they do. 

This is where savings come into play. We can teach teens and young adults to save money by preparing them to make their first big purchase, a vehicle. Did that $2 need to go to waste on a new lipgloss or would it be better used in the “car fund”. While they may not see the importance of $2, you can break it down to explain that $2 a day is $730 a year! $5 a day for a year is $1825! That’s a great start to a new vehicle! 

Small, minimal, purchases add up over time and can result in huge savings if they are reduced or even removed from spending habits. There are also a large number of studies that show saving for retirement from the ages of 18-25 can result in being a millionaire at a much younger age, and even the possibility to retire early. Dedication and work while you’re young means you get to enjoy life when you get middle-aged if done properly.  

3. Money Management Strategies.

My biggest stressor with money management is that there is no cookie cutter one size fits all scenario. It is important to let students mix and match and find what works best for them. For example, I hate cash. It’s dirty, germy, and overall just yuck! I prefer to use my card because it’s easy to clean…my husband on the other hand uses cash for just about everything. The cash envelope system is his go-to money management tool, while I personally prefer a zero-based budgeting system that’s digital. 

Teens need to experiment and see what’s best for them. There are cool new apps out there like YNAB but they will have a monthly fee. If it works best for your teen, then I think they need to also pay for it. Other solutions include 50/30/20, pay-yourself first, cash envelope, and zero-based budget. There are many more but that is just a short list. Again it is important to let the young adults experiment and figure out what’s best for them. This links back to tip #1, hands-on experience. 

4. Spending habits, curb impulse purchases.

Ohh the impulsive buying! It’s so hard and many of us as adults are also very prone to doing it. But we have to set a positive example for the young adults in our lives. 

Last year my class and I were talking about pets. One student, a non-pet owner, pointed out the financial liability of pets and said like children he would never have pets because they are money sinkholes. I pointed out that pets have positive emotional impacts on people and that is worth more than the money they are spending on them. He continued to point out that even as a business teacher I was not above the financial liability created by pets. 

Yes, he’s right, I love my pets. But, to me, they are worth the price of their needs because therapy is far more costly. But I am above the impulse to take home every shelter pet I meet. I understand the implications of adopting too many pets. This is the type of impulse control we need to teach young adults. 

When dieting strictly you find yourself falling off the bandwagon quite frequently once you cut out your favorite foods. Still, if you moderate and portion control your favorite foods to fit within your calorie amount for the day you find yourself successful. Yes, you’re on a diet, and yes you can have a few bits of that chocolate cake. Same with impulse purchases, yes you can buy that 1 chapstick instead of looking for the one you misplaced, but only purchase the cheap one because you know you’ll find your favorite expensive one again. 

5. Why credit is so important?

During my high school years, a million years ago, my best friend charged her gas to her parent’s account at a local gas station. She had no idea how much she was spending each week, let alone each month on gas. She drove everywhere thinking the gas was free for her. Eventually, her parents came knocking, and the bill was due. Several hundred dollars later my friend learned that credit does not mean that it is free, someone has to pay the tab at the end of the month. 

Teaching credit to young adults is tricky. Many companies hide their applications, rates, and services behind inquiry walls. So they get your email or phone number and will spam call you until you finally block them. This makes it incredibly hard to teach the logistics of applying for credit. But as the adult in their life, you can pull up your credit contracts and show them your specific card and what services it provides you with. 

The biggest benefit of establishing credit is applying for mortgages later in life. Mortgage rates seem small, 2-5% on average. But a 700 credit score vs an 800 credit score can cost you thousands of dollars in interest rates! A 100,000 mortgage at 4.5% for 30 years will overall cost $182,680 with a 740+ credit score! That is a ton of money the bank makes in interest. If your credit score is 700 your interest rate obviously increases from 4.5% to %5.64, this increases your overall cost to $207,927!

A great credit score can save you thousands of dollars in the future! 

Start using these tips to teach personal finance

The biggest takeaway from this is that personal finance should be taught in a way where young adults can make mistakes without it damaging anyone’s credit score, or putting the young adult into any kind of debt. They need to experience the stress of paying their bills and balancing work and fun. I do not mean to make it extremely difficult or stressful. A little stress goes a long way when it comes to personal finance. 

Act as their banker, credit services, and open them a ROTH IRA at a young age, once they start working, for them to start putting money towards their retirement as soon as possible. Once they start they won’t miss the money, and they will be so thankful when they turn 30 and realize they can retire in 5 to 10 years if they want. 


Disclaimer: This blog is for entertainment purposes only and in no way provides financial advice that a person should follow without first contacting money management professionals.

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