How to Teach Financial Literacy to Teens

From budgeting and investing to saving and taxes, understanding financial concepts is essential, not only for managing one's finances but also for achieving long-term success. This requires a proper foundation—ideally one established early in life.

That's why the Charles Schwab Foundation created Moneywise America­™ a financial literacy program designed to give teens the tools they need to achieve a life of financial freedom. We talked to three people deeply involved with the program about the power of a strong financial education, delayed gratification, and where teens and young adults today are getting their financial information.

Cindy Scott, CFP^®, a financial planner with Schwab Intelligent Portfolios Premium^®: My father and I would sit down every Saturday, and I'd help him pay the bills. I learned there are expenses that simply must be paid. We'd tithe 10%, then we had a separate savings account, whether for an emergency or because we were planning a family trip. He wouldn't have articulated it this way, but my father was teaching me the function of money and how to prioritize it. It can't all be spent on the fun stuff!

Holly Moore, a college and career counselor at Uplift Hampton Preparatory in Dallas: Most lessons I learned were through trial and error—and there were plenty of errors! I was well into my 30s before I could take a vacation or buy a car because I just didn't prioritize my goals and was living beyond my means. I joke with my students that I made bad decisions so they don't have to.

Cindy: In my mid-20s, I racked up some pretty big credit card bills that took me quite a while to pay off. It's important to establish a credit history, but teens need to be taught healthy debt management—that is, pay the balance each month and save up for things they can't afford.

Holly: It was the same for me. I opened a credit card in college, and, at first, I would buy something and pay it off immediately. However, as time went on, I would buy a pair of shoes or go out to dinner and just charge it. When you're making only the minimum payment, those shoes end up costing double because of interest.

Mohammad Amer, a student financial literacy ambassador from the Boys & Girls Clubs of Greater Milwaukee: When I received my very first paycheck, I spent it all the same day I got it. And I immediately regretted it because I didn't have any money left for the important things I needed over the next two weeks. This also prevented me from going out with friends when I really wanted to. It taught me the importance of creating a budget and setting money aside for needs and savings before even thinking about items I wanted to buy.

Holly: Unfortunately, discussing money is still taboo in a lot of families, so many students are getting their information from social media. And that's a problem because when you see someone on Instagram driving a fancy car, you don't see the financial reality behind it. Maybe that person doesn't have a good credit score and is paying 19% interest on that car loan. Or maybe they're behind on payments and facing repossession. There's no context for what it actually takes to achieve these things—and what other goals they may be sacrificing.

Mohammad: Having "buy, buy, buy" in my ear, especially when social media makes things available at my fingertips, is a real influence. But I'm lucky; I also have a solid financial education. When I want something, I know to take a step back and ask, Do I really need it? Most of the time I decide I should just stick to my budget.

Holly: Adults can model this behavior for the teens in their lives. Share your financial wins and missteps with them. Have open and honest conversations about wants—for instance, taking a trip or buying a new phone—and how waiting to make that purchase can allow you to save up for it, pay cash, and avoid interest. Ask them where they see themselves in 10 or 20 years and use that as an opportunity to talk about steps they need to take to make that vision a reality.

Cindy: Make it real for them. Have your teen identify goals that are important to them, something like concert tickets or a first car, and work with them to devise savings plans for those goals. As they rack up some successes, their enthusiasm can grow, and they'll likely become even more committed to their goals.

Mohammad: Getting a job is also really important. Not only will they learn valuable skills, but when it's your money, you become more thoughtful in how you spend it. For me, I was more motivated to save my money for larger financial goals rather than splurging on small expenses that provided temporary enjoyment.