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Etobicoke, Ontario
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How Can You Prepare Your Teenager for the Reality of Debt?

As any parent of a teenager knows, the teen years can be awkward and messy and confusing and exciting all at once. These years are also full of learning opportunities. At school and at home, teens are learning life skills that are important for tackling adult life. Some of these lessons are about managing money and debt, and parents have an important role in supporting this growth in financial literacy.

There’s strong evidence that talking about money at home helps create positive habits when teenagers are out on their own. Statistics from the Financial Consumer Agency of Canada (FCAC) show that students that have bank accounts and discuss personal finances with their parents one or two times a week score higher on a financial literacy assessment than those who do not.

So how can parents encourage regular money conversations with their teens? How can they build on what’s being taught in school?

There’s a guideline to what should happen. This year, try a new tactic for discussing finances with your teenage son or daughter — it may help them as they resume their studies this fall.

What should teenagers be learning about finances in high school?

Last summer, Ontario made it a priority to add more financial literacy to their high schools’ coursework. With so many Canadian families living with the reality of large mortgages and heavy consumer debt, the hope is that this push can give young adults an early start on healthy money management.

At this age, it’s not so important that teens learn about saving for retirement or the various types of debt solutions that exist. High schools should be teaching a baseline of financial literacy, including topics like:

  • Changing trends in banking. When teenagers reach the age of majority, a whole world of spending opens up to them through credit cards. Today’s technology has made it simple to make purchases — NFC technology in smartphones, tap credit cards, and instant payment using business apps (such as Starbucks or Uber). Rather than teaching kids about signing cheques, teenagers should be preparing for how to use caution and avoid overspending with easy forms of payments.
  • Creating a budget. Once cash starts coming in from a part-time job, teenagers should learn how to create a budget that tracks money coming in and going out. They should also be introduced to real-world scenarios. How much percentage of your budget should go towards rent once you’re on your own? What about groceries, gas for a vehicle, or entertainment?
  • Differences between “good” and “bad” debt. Teens don’t need to know the details of bankruptcy, but they should know what forms of debt are okay and what should be avoided. Common debt questions can include whether a student loan is a good investment — most financial professionals advise, that if student debt helps an individual gain wealth in the long run, it’s a good form of debt.

How can parents support this?

Parents can introduce conversations about money at opportune times. They can also reinforce good financial habits by modelling good habits themselves. Making sound decisions with your household budget, then explaining why you’re making those choices in regular conversation, can help give your teen a realistic look at money and debt management.

For an added push, you can use online resources to assist your conversations. In this episode of her podcast, finance expert Jessica Moorhouse speaks with TeensGotCents’ Eva Baker about money lessons for teens, and how to spark them at home.

Good habits are created over time. All these learning strategies — at school and at home — can help your teenager develop a healthy relationship with money. And while they likely won’t be able to avoid debt altogether, they’ll be better equipped to manage it as an adult.

What money lessons do you think are important for teenagers to learn? Join our conversation on social media by using the hashtags #BackToSchool, #DebtSolutions, and #HighSchoolParents.

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