How early financial education shapes teenage behaviour

Young people learn to prioritise needs over wants, resist impulse buys and evaluate advertisements

It makes sense to teach teens about handling money smartly. Getty

To understand why the teenage years are the best time to financially educate children, it is crucial that we understand something of teenage brains and how they think.

Until recently, it was thought that the teenage brain was similar to the adult brain, just newer. This is apparently far from the truth.

In their book, The Teenage Brain, authors Frances Jensen and Amy Ellis Nutt say “teen brains are both more powerful and more vulnerable than at virtually any other time in their lives”.

“Due to heightened brain neuroplasticity, they learn faster at this stage,” they write.

They go on to explain that the knowledge becomes more entrenched the greater number of times information is repeated, which strengthens the neural connections.

That’s why it makes sense to teach teenagers about handling money smartly at this stage, because the knowledge gets hard-wired in their minds more quickly and effectively than in adults.

With a little reinforcement, this critical knowledge gets cemented and their altered behaviour now becomes instinctive.

It becomes an “unconscious competence”. They get so good at it they don’t even realise they are using that skill because it becomes second nature.

They are instinctively more mindful about spending money because they are intentional about thinking about it.

They are better equipped to prioritise their needs over their wants and better trained to resist impulse buys.

Delayed gratification and impulse control are the cornerstones of what it means to be financially educated. These abilities have ramifications beyond just the financial realm.

They correlate to better academic performance, higher paying jobs, better health and more successful relationships.

Another reason to teach teenagers these skills is to help them to see beyond the facade of slick sales techniques and glossy, glamorous advertising messages.

Teenagers are vulnerable to the power of suggestion. With unrestricted access to the internet and social media, they are inundated with suggestions at the touch of a smartphone. They aren’t trained to evaluate these suggestions or advertisements.

Getting them to think critically about what they see and what is offered becomes imperative to their physical and mental well-being.

A key part of financial education is being taught how to critically evaluate advertising messages, to be able to question their veracity and develop a healthy scepticism about the claims they make.

This particular training and skill development have far-reaching consequences in so many aspects of their lives.

Another key consideration with regard to teenage brains is the fact that the human brain develops from back to front. This means that the prefrontal cortex isn’t fully functional until their early 20s.

The prefrontal cortex is the area of the brain responsible for insight, risk assessment, judgment and planning.

Little wonder then that teenagers seem so lacking in these areas and a clarion call to why we still need to keep the guard rails up with regard to setting limits and restrictions.

In the book, Ms Jensen goes on to say that while the brains of teenagers are “primed to learn, they are also exceedingly vulnerable to learning the wrong things. This means that a little bit of stimulation to a teenage brain can lead to a craving for more stimulation that can, in certain situations, result in a kind of overlearning – commonly known as addiction.”

She says that teenagers get addicted to every substance faster than adults, and once addicted have much greater difficulty ridding themselves of the habit.

There might be one more addiction that’s far more insidious: online trading platforms that lure unsuspecting teenagers. It’s easy to see the irresistible appeal these platforms have:

• They leverage technology in innovative ways, which is always a hit with the tech-savvy generation.
• They offer a constant stream of dopamine hits with notifications and messages.
• They offer beguiling promises of quick financial wins and “investor” status.

This is aside from the user interface being attractive and frictionless – to entrap teenagers; the warnings and disclaimers being glossed over – to confuse them; and the “gamification” of the platform – to keep them addicted.

Delayed gratification and impulse control are the cornerstones of what it means to be financially educated

Marilyn Pinto,
founder, KFI Global

It’s key to remember here that behavioural addictions are just as dangerous as chemical addictions because they make use of the same brain circuits and deserve just as much oversight.

Depending on industry self-regulation is akin to the fox guarding the chicken coop. It’s unreasonable and unworkable due to conflicts of interest.

It’s up to us grown-ups to step in now to ensure youngsters don’t get ensnared. They are inadequately equipped and thus vulnerable to the dangers lurking behind the innocuous screens.

We cannot afford to wait, as there is too much of a downside. We are their first line of defence and the time to act is now.

Marilyn Pinto is the founder of KFI Global