The Center for Financial Empowerment, the nonprofit organization founded by SCE Credit Union, has a mission to educate high school youth with personal finance concepts, preparing them to make smart financial decisions as they move into adulthood. As part of that mission, we encourage parents to take an active role in helping their teens establish strong financial habits for managing money.
In this post of our “Teach Your Teen” series, we explore the importance of income and ways to get it. At some point in our lives, we all hear someone say the now infamous line, “Money doesn’t grow on trees!” Parents are most likely to utter these words, since kids don’t automatically understand where money comes from and what it takes to get it. Learning about the realities of making money is an important step on the path to adulthood.
We all need money to survive in our society, so how do we acquire it?
To acquire money, a person must offer something of value. The most valuable thing you have to offer is your time and labor. Working a job is how a person exchanges their labor for money. You provide your skills in mental and manual labor to help a business, and in return the business owner pays you money. This can take place when the business is the employer and the laborer is the employee, or in an entrepreneurial situation where the laborer owns the business and is working for himself.
At the most basic level, the work you do to earn money is your job. The money you earn is income, and the amount of income you earn will determine your quality of life.
- Do you want to live in a nice home and eat well?
- Enjoy entertainment and fun experiences?
- Go where you want when you want?
As a teen, your parents’ income provides these things for you, but when you become an adult you will provide these things for yourself. Where you live, what you eat, where you go, and how much fun you have will all depend on the amount of income you make. You can begin planning and doing things now as a teen – to enhance your ability to make the income you desire later in life.
A worker becomes more valuable to a business as their knowledge, skills and performance increase. The combination of knowledge, skills, and performance is called human capital. If a person wants to make a higher amount of income, they should invest in improving their own human capital by getting more work experience, education, and guidance from mentors or advisors.
Building a career for income potential
Most people work many different jobs on their way to establishing their career. A career is a lifetime journey of building and making good use of skills, knowledge, and experiences. Building a stronger career gives a person the opportunity to earn more money. Earning more money gives them the chance to enjoy the standard of living they desire.
In other words, the amount of income you earn later in life will depend on the amount of human capital you possess that is of value to businesses or employers. Teenagers can begin to plan out a path for higher education and careers that will enable them to earn the income they desire.
Here are a couple of easy tools to help parents start a dialogue with their teens about education, careers, and income.
The Center for Financial Empowerment is a 501c3 nonprofit organization whose mission is to empower disadvantaged youth through financial literacy education. Find out more about our work at Center4FE.org.
Does Money Grow On Trees, Take Charge Today, January 2021