Educating Teenagers and Young Adults on Personal Finance

[Musicwhiz]

It was my observation that even though personal finance is a much discussed topic in the news, schools and educators have yet to come up with a comprehensive compulsory system to educate school-kids and teenagers on how to properly manage their finances.

I was speaking to a friend over lunch and I remarked that personal finance is much more important than earning a lot of money, as it involves discipline and sacrifice. Most forumers will understand that earning a lot is useless if you are spending equally much, or even more, resulting in negative cash flow or zero savings. As d.o.g. had once pointed out many years ago - if you don't save, you can't invest.

My suggestion was for parents to start educating their own kids on personal finance, but my friend made a good point - most parents are either too reticent when it comes to personal finances (too shy to talk or "why should the kids know so much about our money") or else they themselves may be clueless about personal finance!

So the question comes back - how do we educate our youth on personal finance and make them financially literate and aware? The whole system is stacked against prudent investing and conservatism as banks require long loans with interest to earn money, and high interest credit card debt and car loans make up a good proportion of a bank's earnings. So they will be the last to educate young adults.

Any suggestions would be welcome!

[Drizzt]

Let me ask you a question. Do you brush your teeth in the morning? If you do, why do you brush your teeth? Is it because you want to tell people that you are clean? How do you get to the point where you will ALWAYS brush your teeth no matter whether you are at home, outfield in the army or what?

Translate that to being aware of money for teenagers. How do you make them do that?

By making it intuitive since young. That means making it into a HABIT for the brain. Habit is so hard to shake off compare to anything else. You will realise you will always twist your hair, go for a cigerette, have a morning cup of coffee. IT IS DIFFICULT TO SHAKE OFF.

The key is how do you create a trigger along the lines of Cue- Routine - Reward

Read the Power of Habit by Charles Duhigg

[CY09]

Agree with Drizzit that mnaging finances has a lot to do with habits.

Being 24, I have noticed a considerable difference between me and my peers where it will pain me to spend $5+ weekly to drink starbucks when kopitiam sells cheaper, unlike many of my friends. I attribute it to the fact that I am mentally cued to planning for my future monetarily (saving for rainy days etc) and automatically putting a proportion of my income to my savings. What transpired me to do this is my parent's beig a role model to me.

Both of them are prudent with their finances and have led by example in teaching me how to save and budgetting. My dad has always saved a portion of his income and consistently preach me about saving and investing since I was in Primary school ( if memory serves me right). In addition, he would give me only certain amount of weekly allowance (which wasn't a lot) and tell me "that's all". So yeah, Parents are really the ones to mould the habits of the young.

The second would be to incalculate in us to being less seeking to instant self-gratification. Our generation has grown up expecting that reward comes instanteously after our hard work/efforts. This translates to the weekly shopping spree after a hard week's of work. So guess one way is to teach us to learn to hold our expectation to getting a reward instanteously. Peer pressure might work to if one sees that friends are saving instaed of spending their money on the latest zara or forever 21 clothes For it will spur within the individual the temptation to buy just to "keeep up with their friends" .( those instagram pictures of friends eating fancy food just has the same sinful effect !!!).

So solutions i belive are parents being role models and teaching a generation to be less instant self-gratifying.

[Drizzt]

actually its not so much about KNOWING.

people smoking KNOW that cigerettes is bad. those like to eat cakes KNOW that its bad for health. knowing doesnt mean you will actually do something about it.

if you read the book its about changing that routine in Cue-Routine-Reward.

You will get the same Cue in your head that you need coffee. The difference is how you change a Routine, from buying starbucks, to buying Yakun or just replace it with eating walnuts. The reward should be the same. It keeps your brain active.