Having a strong financial education is important at any age. Without financial literacy, those who achieve success have difficulty maintaining that standard. Even worse, those who experience hardships will struggle even more without a solid knowledge of finance.
Most adults will freely admit that managing finances is a complex challenge, so imagine how much harder it is for teens! The more we explore the topic growing up, the greater our chances are of gaining financial independence. More knowledge also helps younger generations avoid taking on massive amounts of debt, which is a problem that’s becoming more common than ever.
According to the Organization for Economic Cooperation and Development, 25 percent of students that completed the OECD’s financial literacy test could not make proper decisions about basic spending habits. The OECD also found that only 10 percent of students could understand complex issues like income tax.
This is a serious problem not being addressed in homes or schools. The Financial Education Council released a report that shows only 23 percent of teens talk to their parents about money. We also know that, in many cases, “money talk” is considered a taboo topic in families. However, if nobody is talking about it, how are kids supposed to learn how to become fiscally responsible individuals?
How COVID-19 and Connectivity Have Changed Consumerism For Younger Generations
The widespread shift in consumer behaviors resulting from the COVID-19 pandemic has also affected teens and young adults. A PWC survey found that there has been a 10 percent increase in online shopping as the main channel for groceries, and the International Trade Administration found that there was a sustained global uptick in e-commerce across nearly all industries.
In addition to the increase in online shopping, there was also a notable increase in order size, especially in food categories. The same PWC research showed that 52 percent of German shoppers bought more during lockdown. In comparison, 70 percent of French, Spanish and Italian shoppers upped their average order size. Overall, more than 80 percent of consumers say they plan to continue to shop for essentials like food online, even after the pandemic ends.
Some of the most significant shifts in spending have happened with younger demographics, particularly in the 15-24 age range. This age bracket is also the most connected age group, with 71 percent reported to be active online compared to only 48 percent of the global population.
In sharp contrast to previous generations, today’s teens are consistently exposed to various financial offers. This includes mobile payment apps, prepaid cards, “buy now pay later” companies and e-commerce marketplaces.
Because these types of exposure are unavoidable for today’s youth, the need to reinforce financial education from a young age is more important than ever before.
Here’s Where Payment Cards Can Help Parents Teach Kids About Financial Responsibility
Most parents want their children to grow up to have a better, easier time than they did with learning to manage money. Encouraging your kids to become comfortable with handling and discussing money in the early years can help instill a strong sense of personal responsibility when it comes to finances.
Even if they receive an allowance and learn about the value of money and work, they still need to understand how to take care of a bank account. Helping them open checking and savings accounts can act as a foundation for the kind of education that leads to financial freedom.
Many financial institutions are now offering special payment cards for teenagers to build a relationship with future customers. These cards can be virtual or physical, but most have a full range of online services to eliminate the need for in-person visits. Both traditional banks and digital solutions like Starling and Blackcatcard offer these types of accounts.
Payment cards not only provide an educational tool for parents, but they also help teens understand where and how they allocate resources each month. To this end, adults can help teens set savings goals (e.g., – buying a car or going on a spring break trip) and learn about interest rates and credit scores. Cards like these are also excellent solutions for traveling abroad as an exchange student now that border restrictions have begun to ease.
Practicing With Payment Cards Gives Kids an Early Start On Financial Education
Right now, large banks are still the ones that hold most of the power when it comes to the ability to mass-market financial education. Fintech companies and educators are working hard to catch up. Still, it’s important to understand that most of the programs available seek to capture young adults right before they enter college to create new customers.
These programs are intended to develop low-risk, responsible future customers so that the banks can more accurately predict and manage consumer behaviors in the future. Opting for payment cards allows teenagers to have controlled, supervised experiences with money and helps to bolster their credit score. Getting credit as an adult is incredibly difficult without prior financial history. It also commonly leads young adults to riskier financial institutions because it’s all they can get.
Having candid discussions about money during childhood and giving teens a solid foundation of experience with money management via payment cards is an excellent way to set them up with real-world experience that will adequately prepare them to navigate their finances as an adult.