Financial Literacy is Key to Effective Money Management for Teens

Former Federal Reserve Chairman Alan Greenspan once said that “financial education is a process that should begin at an early age and continue throughout life. This cumulative process builds the skills necessary for making critical financial decisions.”

At Stearns Bank, we understand the importance of helping our community’s youth build a strong financial foundation so that they better understand basic concepts like budgeting, simple interest and establishing and maintaining good credit.

According to the Council for Economic Education’s (CEE) 2020 Survey of the States, only 21 states in the U.S. require high school students to take a course in personal finance. While this denotes a marked improvement since CEE’s first survey in 1998, there remains a sizeable financial education knowledge gap.

Stearns Bank believes that financial capability education, improves the financial health outlook for our youth and better prepares them to tackle unexpected financial situations or prepare for significant life milestones like paying for college, purchasing a home, opening a business or building a nest egg.

Stearns Bank offers the following tips for Generation Z ­ – and their parents – to shore up money management skills and prepare for the post-graduate workforce:

• Set Specific Measurable Attainable Realistic Trackable (SMART) goals. Choose your priorities—whether it’s saving for a computer or building an emergency fund—and make sure they are achievable. Create a plan of action and measure your progress over time.
• Start a savings account (if you don’t have one already). Stearns Bank offers automatic transfer services to move a set amount from your checking account to savings monthly.
• For working-age students, consider part-time or seasonal employment. You will learn more about personal responsibility and have an opportunity to manage expenses.
• Track your spending and avoid making impulse purchases. Create a budget and review it periodically to make necessary adjustments.
• Gain perspective about relevant financial skills. Some high school classes, and financial literacy-based websites, provide lots of considerations as you prepare for your future.
• Learn about credit scores—a representation of your financial past, present and future.

Having the knowledge about how to best manage your money is just the start. When young adults practice proper money management techniques early, they’re more inclined to make effective financial decisions throughout life. The sooner your children start to grasp these concepts, the more apt they’ll be for a better financial future.