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Teaching Teenagers about Money
A recent survey carried out by the Association of Investment Companies (AIC) has
found that nine out of ten parents and teachers feel basic finance skills should
be taught in schools. It’s becoming clear that many teenagers are leaving
education without proper financial knowledge and many are ignorant of what
function many financial products serve. Sufficient financial education is
lacking in schools, so you may think it an important topic to talk about at
home. Here are a few things that you should explain to your children to improve
their basic finance skills.
Tell them that patience is important
We’re living in a fast moving society where young people increasingly want to
experience things earlier. It is important to stress that getting rich quick is
very difficult unless you are very lucky. Demonstrate that saving a little over
a long time is an excellent policy to having cash available when they grow
older. For instance, if they save just £1 a day between the ages of 18 and 25
then they’ll have a pot of cash worth £2500 to use.
Teach them to shop carefully
Young people like to spend, and for the older generation it often looks like
they spend frivolously on clothes, the latest gadget and going out. However, you
can show them how to shop well, and show them where to get the best prices. If
there are shops or websites that you have used in the past which you think are
particularly cheap, then letting your kids know about them won’t hurt. Make sure
they shop around for financial products as well, which has become much easier
with the internet.
Warn them about debt
A lot of people seem to think debt is free money until they realise that their
deep into the red and paying interest. Stress that by being in debt, you will be
paying for having money, which almost seems like a contradiction, and in the
long term this is not a good thing. Effectively, the most important lesson that
any teenager can learn about money is never borrow a penny more than you
absolutely need. That way they will pay less for debt if they ever accrue any.
Be sure that they know that a lower APR when it comes to debt is usually better.
Show them why the interest rate matters
Consumers are too complacent and dismissive about the importance of interest
rates, but like saving a little more they can make a massive difference in the
long term. Many people don’t shop for the best interest rates and find out
what’s best for them; they’re accepting too little when saving and too much when
they borrow. Teenagers need to be warned against this attitude from an early
age.
Make sure they know how to calculate a percentage
This is vitally important for thinking about both savings and borrowing, because
from it they will be able to work out how much they will accrue or pay for a
gross sum. Working out a percentage is easy. Divide your number by 100 to find
out 1%, multiply that result by 10 for 10% or 32 for 32% and so on. So, to find
out what 5% of 2500 is, divide by a hundred to get 25 (1%), then time by 5
(125).
Visit the Santander website for a competitive range of
savings
products.
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