Financial Literacy Learning the Basics

Understanding how money works is important for everyone, especially teens getting ready for financial independence. Here's a simple guide that details the basics of financial literacy to help you manage money smartly.

Bank Accounts  

If you're a teen without a bank account, it's a good idea to talk to your parents about opening one. 

A bank or savings account is more than just a safe place to keep your cash — it allows you to earn interest on your money. 

Taking this step toward financial responsibility now could help you get a credit card based on your balance in the future.

Compound interest 

Understanding compound interest is very important — whether it's for savings or debts.

For money you put in your savings account, compound interest means your money increases over time because you’re earning interest on it. 

This principle also applies to debts. If you have outstanding balances, such as on credit cards, that also incurs interest, and you’ll have to pay back more.

Understanding compound interest shows why it's important to start saving early and pay debts quickly.

Credit scores 

Credit scores are like grades in school that measure your financial behaviours. 

As you get older, having a good credit score is very important for big purchases like a car or house.

Every time you borrow money, whether it's from a bank or using a credit card, how well you pay it back impacts your credit score. 

Lenders look at this score to decide if giving you a loan is a safe choice. 

Your score also affects the interest rates you’re offered. The better your score, the less you might have to pay to borrow money.

Budgeting 

Using money from an allowance or a job teaches valuable lessons. 

If you don't earn your own money, you could talk to your parents about getting an allowance for things you want or need to buy.

Knowing how to handle a small budget helps you learn to how to make smart choices about what to spend your money on. 

You might think about buying a new t-shirt today — or decide to save your money for something bigger later.

Pay yourself first 

Learning to save money for the future is a lesson that will help you for many years. 

If you get an allowance or have a part-time job, think about talking to your parents about opening a savings account to save up for something big.

Each time you get paid, put some of your money into this savings account for your future. 

Ask for help and advice

To help save even more, you can ask your parents if they can match what you save to support your efforts.

Before you make any money decisions, talk with your parents or guardian to help make sure you’re carefully thinking about all parts of managing money.

Important note

The guidance given here is based on information that was correct when published and is meant for learning only. For advice that fits your specific situation, talk to a professional advisor. Always look for the most recent information and rules on official websites.