Teaching teens about money is an extremely important part of raising your teenagers to be able to navigate adult life.
For parents, the teenage years can be an awkward time for kids. During this period, the kids are experiencing new situations and acquiring more responsibility. Not only that, they’re establishing a huge part of their relationship with money, as well.
Teenagers are old enough to know and thoroughly understand how money works. Kids this age are beginning to perceive the significance of the consumer world. That said, it is undoubtedly an excellent opportunity or chance to make your kids relate to money.
“When it comes to money, ignorance is not bliss” (Sandra S. Simmons)
Meaning, the things you don’t know can harm you. For this reason, as parents, you must teach your kids about money. For a little help, here are some tips to teach teens about money. (Do your teens love to read? Check out these Money Books that are Perfect for Teens)
How-To Get Started Teaching Teens ABout Money
Help Them Open Up Their Bank Accounts
So that you can monitor the best balance, set them up with a teen checking account that provides you, the parent, joint account holder status. Also, you can have complete access to their account and at the same time allowing your child to manage and monitor the account with a phone or online.
It is a good idea to start with a savings account for future purposes and a checking account for everyday expenses. Make sure to give your kid a debit card associated with the checking account.
Moreover, aside from cutting down the need to bring cash and giving proof of where the cash is being sent, a debit card has other perks, as well. One, debit cards offer you the benefit of a credit card.
However, because they cover expenses directly with cash from a checking account, debit cards help keep a strong fence on the spending of your kids.
Teach Them The Basics Of Some Insurance
If your kids know how to drive, then it would be best to teach them car insurance. Start by explaining the insurance’s purpose, which is to cover large expenses that’d otherwise be hard to pay for on their own.
Additionally, focus on deductibles and review the policy. Think about telling them that they will be responsible for covering the deductible for incidents they cause.
Encourage A Savings Mindset
Every time that your kids earn or inherit money, whether from gifts, allowances, or jobs, motivate them to reward themselves first. With that said, they must set a portion of their money into their savings account for future goals.
Also, if they plan on making a large expense, make sure to assist them in setting a goal that is particular in two aspects: when they need the money and how much money they need. After that, help them figure out the frequency and amount with which they need to save to reach their target.
Remember, saving money is a healthy behavior even if your teen is saving a very small amount of money it can make a big difference.
Plan For Retirement
In their teenage years, planning for their retirement might not be on top of their mind. Even so, help your kids understand and look forward to how saving can have a huge effect on their future.
The earlier they know that retirement is the largest expense they will ever save for, then they are in an advantageous position because time is, for the most part, on their side. Your kids can have more money in the future if they start saving earlier.
Reading A Paycheck
It is critical and vital to show your kids the source of the money that covers all those bill payments, credit card swipes, and more. Show your teens how much money is take out for health insurance, retirement, and taxes.
By doing so, it shows that there is not an unlimited or limitless amount of money. Teaching kids how to read a paycheck can, for the most part, steer clear of future worries and troubles when their first paycheck comes in and it is less than what they predicted.
Bad Debt Versus Good Debt
When a person becomes an adult, debt can be an essential part. However, parents must teach their teens the difference between bad debt and good debt. Bad debt refers to extremely high consumer debt.
On the other hand, good debt refers to low-interest-rate debts that help borrowers grow wealth over time such as a student loan or mortgage. What’s more, bad debt could also mean borrowing money on your credit card for petty reasons.
Keep in mind that you should be using this borrowed money to acquire a skill or an asset that’s going to be an advantage to you. Make sure to look at what you’re obtaining over time from the borrowed money.
Creating A Budget
Before the stakes become higher and your kids start earning money, experts suggest that parents must teach their teens how to manage their money. For instance, if a teenager earns a paycheck from an allowance or a part-time job, parents must help them create a budget that records how much cash is rolling in and how much money is intended for spending and savings.
If you want your kids to develop great saving habits and spending habits, they must see you making wise saving choices and spending choices. In a nutshell, practice what you teach. Also, make sure to teach with stability and constancy.
What’s more, it is also a good idea to show your own budgets to your kids. If, for example, they are not at ease with disclosing or revealing their own finances, parents can set up a fictional outline of living expenses and income. Additionally, it is much better if it is based on the living location and profession of your child.
When your teenage child racks up some gifts of cash or savings, maybe from their graduation, it might be an excellent time to discuss investing with them. Inspire and motivate them to entertain the idea of investing regularly and creating long-term goals. Additionally, help your kids set up a bank account of which they can use to save their money.
However, if you have no idea about investing, worry not. Parents can give them a book that clarifies or illustrates how investing works.
Teaching Teens About Money is Important
Money matters can look like or appear to be insignificant during the teenage years of your kids. However, excellent money management is essential so that your kids can learn financial independence as early as possible. Teach them the value of money and make them fully understand that money is not an inexhaustible resource.
Ensure that as parents, you model good money behaviors that your teenage kids can adopt. Talk about your experiences or how you manage your finances. Also, it is a good idea to share how much you make and what you do with it. Teaching your kids about personal finance is something that can’t be done overnight. It takes a lot of time. Teaching your teenagers about money is a really important part of being a parent.
However, if you put in clear communication and effort about money, you’ll instill stellar money habits that’ll serve your kids very well.