Teenagers might be experts at spending money but when it comes to managing their finances, most youngsters have a lot to learn. If you want to ensure your kids are able to make savvy financial decisions, take a look at these five ways to teach teens about managing money:
1. Create Budgets
Learning to budget is a skill that your teen will carry with them for the rest of their life, so it’s well worth teaching them how to plan for future costs. If you have a household budget, use it to show your teen how to plot their upcoming expenditure. Giving your teen an allowance every month, rather than every week, can give them the opportunity to manage their own budget, although be prepared for them to make some mistakes as they adjust to having more money at their disposal.
2. Encourage Saving
As a parent, when your teen receives money, whether it’s their allowance, birthday gifts, or income from a part-time job, encourage them to save a percentage of it. Talking about larger purchases, like a games console or even a car, can incentivize teens to save and keep them motivated.
3. Help Them Open a Bank Account
Your teen may already have a kid’s saving account, but a bank account is the next step up. Most banks will allow individuals to open a checking account at the age of 16 or 17 but, if you’re willing to be a joint account holder, your teen may be able to have their own bank account at a younger age.
4. Show Them How to Invest
Making investments can be a savvy way to make your money work for you and it’s something everyone should learn about. Showing your teen how to use automated trading software and explaining to them how investments work can help them to develop skills that will stand them in good stead in later life. Although you generally need to be 18 years old to start making your own investments, you’re never too young to learn how to make sensible investment decisions.
5. Spend Time on Credit Cards
From the age of 18 onwards, teens are bombarded with offers from credit card companies. Unfortunately, lenders know that young people are more susceptible to marketing material and may have less knowledge about how easy it is to get into credit card debt. That’s why it’s essential to teach your teen about how debt works and, in particular, how credit cards should be used. Spend time showing your teen how debt can increase, even when minimum repayments are made, and make sure they’re aware of how easy it is for debt to build up.
Be a Financial Management Role Model
Your teen may not like to admit it but there’s no doubt you’re still a role model to them as they get older. By letting them see you managing your own money and talking to them about financial decisions, you can let them learn from your example. This can be a great way for your teen to learn important lessons that they’ll use for years to come.