Equity. Mutual Funds. The WACC. These are only a few of the finance terms I’ve stumbled across in my journey to try to understand just a little bit more about the confusing world of market prices, investment decisions, and assets. Finance can be intimidating, and sometimes it can feel entirely irrelevant to teens’ lives, but it’s important to take steps toward learning about it now, rather than later.

Recent studies have shown that the majority of teens feel a lack of confidence when it comes to personal finance. In 2021, over 1,000 high school-aged students completed a survey about their financial knowledge. About two-thirds of these participants indicated discomfort with topics like paying taxes, saving money, and establishing credit (Reinicke). It is also clear that future finances are a significant source of stress for today’s teens. College tuition prices are soaring, as is the cost of living expenses, whether the price of a car or a night out with friends at a restaurant.

While some states seem to have recognized the importance of financial literacy, only 8 states actually require high school students to enroll in a financial education course before graduating (Epperson). Yet, it is clear that these types of courses have substantial impacts on student well-being and readiness for the real world. In fact, a research project conducted by the National Endowment for Financial Education found that even a ten-hour course on money matters resulted in considerable gains in student knowledge and confidence in the realm of personal finance (Mead).

However, because it is unlikely that schools and states will mandate financial education, teens need to work toward a better understanding of these topics on their own.

While students under 18 years of age cannot open their own brokerage accounts, they can operate a custodial account with the permission of a parent or guardian. Experimenting with financial planning with small amounts of money can help students feel comfortable with the principles of investing and with the stock market from a young age.

Students can also learn a lot by simply perusing YouTube series like KidVestors or Gen-Z Finance to learn about the basics of budgeting and investing from peers. There are also many informative podcast series on these topics, including Money with Mak and G, ChooseFI, and Popcorn Finance – all of these aim to promote financial literacy in relatable, digestible ways.

But why spend your free time worrying about financing your future?

One of the most important benefits of learning how to be financially independent as a teen is that building good spending habits will become more important later on. It never hurts to begin accumulating savings from a young age, and some of this money can eventually help finance college or other expensive endeavors in the future! It also never hurts to have some extra money stored away in the bank in case of an unexpected emergency.

Finance is a lot more complicated, though, than figuring out what to buy and when to buy it. Teens need to learn about topics like the advantages and disadvantages of different financial decisions, like taking out a loan or when to pay for something with cash over credit. Paying for a product or service with credit may feel intimidating at first, but building a credit history early on in your life is important for when you want to make a big purchase down the road, like a house.

At the end of the day, I want to encourage teens not to be afraid of the stock market and of the risks of opening a line of credit or investing in a company. This is not to say that everyone should jump into opening a custodial brokerage account. But learning about these principles can go a long way in shaping one’s financial well-being for the future.