The Benefits of Financial Literacy for Teens and Young Adults
Financial literacy is more than just a valuable skill—it is a necessity. Many young people enter adulthood without a solid understanding of money management, which can lead to long-term financial struggles. According to one study, nearly three out of four teens (74 percent) are not financially literate.1
Teaching financial literacy to teens and young adults equips them with the knowledge and tools they need to make informed financial decisions. Here are some of the key benefits of financial literacy for young people.
1. Encourages Smart Budgeting Habits
Understanding how to budget helps teens and young adults control their spending, prioritize expenses, and avoid unnecessary debt. Learning to track income and expenses at a young age lays the foundation for financial stability later in life. By practicing budgeting skills early, young people can develop habits that lead to long-term financial security.
2. Helps Avoid Debt and Credit Pitfalls
Credit cards and student loans become financial traps if not handled appropriately. Many young adults accumulate significant debt because they don’t understand interest rates, minimum payments, or the consequences of missing payments. Financial literacy enables them to make informed choices about borrowing money, using credit responsibly, and understanding how debt affects their financial future.
3. Builds Strong Saving and Investing Habits
The earlier you start saving, the more financial security you can build. For example, if a 16-year-old invests an initial $500 and contributes $100 per month, they could have saved nearly $50,000 by the time they’re 40, based on a 4 percent interest rate.2
Teaching young people about emergency funds, compound interest, and investment strategies helps them grow their wealth over time. Understanding how to save and invest allows them to take advantage of financial opportunities and avoid living paycheck to paycheck.
4. Improves Decision-Making and Financial Independence
When teens and young adults understand financial concepts, they become more confident in making financial decisions. This confidence can extend to everything from housing and transportation to major purchases.
5. Prepares for Long-Term Financial Goals
Whether buying a home, starting a business, or strategizing for retirement, financial literacy helps young people set and achieve long-term financial goals. Knowing how to budget, save, and invest ensures they can build a solid financial foundation for future success.
Financial literacy is more than learning how to handle money; it’s about taking control of your financial future. By equipping teens and young adults with essential financial knowledge, we can help them avoid common financial pitfalls and set them up for lifelong success. Investing in financial education early on is one of the best ways to create a financially responsible and empowered generation.
As always, let us know if you have any questions.
Best,
CRA Investment Committee
Matt Reynolds CPA, CFP®
Tom Reynolds, CPA
Robert T. Martin, CFA, CFP®
Gordon Shearer Jr., CFP®
Jeff Hilliard, CFP®, CRPC®
Joe McCaffrey, CFP®
Phillip Tompkins, CFP®
Important Disclosure Information
Please remember that past performance may not be indicative of future results. Different types of investments involve varying degrees of risk, and there can be no assurance that the future performance of any specific investment, investment strategy, or product (including the investments and/or investment strategies recommended or undertaken by CRA Financial, LLC [“CRA]), or any non-investment related content, made reference to directly or indirectly in this commentary will be profitable, equal any corresponding indicated historical performance level(s), be suitable for your portfolio or individual situation, or prove successful. Due to various factors, including changing market conditions and/or applicable laws, the content may no longer be reflective of current opinions or positions. Moreover, you should not assume that any discussion or information contained in this commentary serves as the receipt of, or as a substitute for, personalized investment advice from CRA. Please remember to contact CRA, in writing, if there are any changes in your personal/financial situation or investment objectives for the purpose of reviewing/evaluating/revising our previous recommendations and/or services, or if you would like to impose, add, or to modify any reasonable restrictions to our investment advisory services. Unless, and until, you notify us, in writing, to the contrary, we shall continue to provide services as we do currently. CRA is neither a law firm, nor a certified public accounting firm, and no portion of the commentary content should be construed as legal or accounting advice. A copy of CRA’s current written Disclosure Brochure discussing our advisory services and fees continues to remain available upon request or at www.crafinancial.com. Please Note: If you are a CRA client, please advise us if you have not been receiving account statements (at least quarterly) from the account custodian.
Historical performance results for investment indices, benchmarks, and/or categories have been provided for general informational/comparison purposes only, and generally do not reflect the deduction of transaction and/or custodial charges, the deduction of an investment management fee, nor the impact of taxes, the incurrence of which would have the effect of decreasing historical performance results. It should not be assumed that your CRA account holdings correspond directly to any comparative indices or categories. Please Also Note: (1) performance results do not reflect the impact of taxes; (2) comparative benchmarks/indices may be more or less volatile than your CRA accounts; and, (3) a description of each comparative benchmark/index is available upon request.
Please Note: Limitations: Neither rankings and/or recognitions by unaffiliated rating services, publications, media, or other organizations, nor the achievement of any professional designation, certification, degree, or license, or any amount of prior experience or success, should be construed by a client or prospective client as a guarantee that he/she will experience a certain level of results if CRA is engaged, or continues to be engaged, to provide investment advisory services. Rankings published by magazines, and others, generally base their selections exclusively on information prepared and/or submitted by the recognized adviser. Rankings are generally limited to participating advisers (to the extent applicable). Unless expressly indicated to the contrary, CRA did not pay a fee to be included on any such ranking. No ranking or recognition should be construed as a current or past endorsement of CRA by any of its clients. ANY QUESTIONS: CRA’s Chief Compliance Officer remains available to address any questions regarding rankings and/or recognitions, including the criteria used for any reflected ranking.