Eleven Tactics To Let Teens Know About Money Management
When your kids become teens, you’ll need to show them the ropes. From learning how to become an adult in society to saving for a house or retirement, it may...
When your kids become teens, you'll need to show them the ropes. From learning how to become an adult in society to saving for a house or retirement, it may seem like you've got a lot to teach them. Teaching your teens the basics of budgeting will help them deal with real money throughout their lives.
Don't worry; we've got 11 top ways to teach your teenagers the value of money. Follow our guide to discover everything from money games for kids to when to open their first checking account.
How to teach your teenager the value of money?
Learning the value of an amount of money is an important lesson. Teaching your teenager that paying bills or car insurance means more than pulling money out of thin air is crucial for their development. So, how do you show your kids the meaning of everyday money?
It's good to start young. When your children are small, please encourage them to save their money in a clear jar. Sure, piggy banks are fun. But, when your child can see the physical evidence of their money build-up, it leaves a stronger impression. For instance, they can see the material value of every single dollar.
In addition, encourage your kids to hand over physical cash at the store. If they want something, get them to pay using physical money. This exercise will teach them the transactional value of each item. Therefore, when your child wants their first car, they'll have a better idea of how much the car costs. It's not a random number anymore.
Teach your teen about wants and needs
One of the hardest lessons we all learn is about wants and needs. Sure, we want to buy a new phone, but we don't need it. However, we do need food to live. In addition, there are certain necessary expenses that we have no say in, such as life or car insurance or income tax. When teaching teens about money, encourage their understanding of wants and needs.
The more they understand they have to budget for their needs, the less they'll spend all their pocket money on their wants. Follow our activities for kids and teenagers to begin encouraging financial literacy.
Why do I need to teach my teenager about money management?
While your child may seem young, the years fly by quickly. Sensible financial behavior early will have a significant impact later in life. When teaching kids about money, you won't want to delve into credit ratings and the ins and outs of loan applications. However, instilling good financial habits will benefit them when they make credit card or loan applications.
For instance, if you encourage sensible spending, their credit score will start strong. If teenagers learn to spend every penny and miss paying their phone bills, they will begin their adult journey with a poor credit history and may even get into debt.
How can I help my teenager manage money?
So, to give your teenager the best possible start in life, teach them savvy money habits sooner rather than later. Follow our financial lessons for teens to teach your kids and teens money management skills.
1. Start at a young age
As we mentioned, the younger you start money lessons, the more financially fit your teenager will be. It may surprise you how much your kid picks up.
For instance, if you're constantly arguing about money or splashing the cash too freely, this will affect child development. Talk openly about family budgeting from a young age.
Perhaps take your kids to the supermarket and encourage them to spend within a budget to give them a chance to understand the value of money and prioritize wants and needs. Can they do the entire family food shop on a budget you set for a week?
When you teach teenagers about money, remember to take baby steps. They won't get it right 100% of the time, but the more you discuss each money matter, they'll grow up with greater financial awareness.
2. Encourage a habit of saving
Teaching children about money and saving doesn't just instill good financial sense but encourages discipline. When teenagers earn money, their initial reaction will likely be to spend it as soon as possible. However, when you promote a habit of saving, it teaches them the value of delayed gratification.
Your family finance situation likely influences your teens' instincts to earn, save, or spend. If they grow up in a household that lives paycheck to paycheck, saving money may not seem necessary.
However, you must teach kids to put their money away for future needs, such as retirement, college, or holidays. Use financial calculators to show them how much more money they will have by saving their allowance.
3. Create opportunities to earn money
Talking about money isn't always enough. Kids need to practice with their finances to become money managers. You could offer them an allowance. However, offering opportunities for your kids to earn money online through social media platforms, chores, or encouraging a part-time job will help them value the funds differently. An excellent lesson for teens is to show them that money is not free.
4. Give commissions, not allowances
If you give your child a weekly allowance, they won't treasure it as much as they earn it. If your teenager is old enough to land a job, encourage them to work a few hours per week. Someone who earns income for their hard work will appreciate the value of money.
5. Teach smart spending
While saving money is good, everyone needs to spend money now and then. Whether your teen wants to buy food, clothes, or concert tickets, you need to help them make smart financial decisions.
With a set weekly income, teens learn to budget. They know how much money they will get and track their spending. They have the means to save up for video games without the instant gratification of wild spending. Talk to your teen about setting a budget to encourage wise spending.
6. The value of giving
An essential financial lesson is the value of giving. Sharing your money values will help your child develop financial skills when talking about money. For instance, you could create "spending,' "saving,' and "giving' jars. Alternatively, there are apps to help teen budgets.
When teens earn, their instinct often is to keep all their money. However, if you encourage them to give their money to a particular cause, they will develop better independence and responsibility.
7. How to grow money
Saving money is an excellent habit. However, it's challenging to meet your financial goals by putting all your money in a piggy bank. Saving money gives your kids a chance at building wealth. Their financial education must include how to invest money and the power of compound interest.
Set up an investing teen checking account or savings account for them — you may need to do it in your name if they are not old enough — and encourage them to begin investing with small amounts of money. You could also consider teaching them about the importance of socially responsible investing. Learning these skills while young and in a risk-free environment will help them later in life.
8. Show good financial behavior
If teens see you waste money or spend too frugally, they'll pick up these habits. Of course, you want to pass on your financial values, but you need to model good economic behavior. If you struggle to maintain good financial planning, sign up for a budget app or seek help from a financial advisor. It's pointless preaching your teenager one thing and then behaving differently.
9. Setting up bank accounts
The best way for teenagers to learn how to spend and save money responsibly is to give them a chance. Set up a bank account in your teenager's name and deposit their weekly allowance or money for chores. Some accounts offer minors debit cards, which is an excellent way to learn how to spend money and gain financial independence.
Talk to your child about their savings goals. When they get each monthly bank statement — or check their account with online banking — they'll see how their money builds. You might also want to set up a savings account for them so they can deposit money for long-term goals, such as buying a car, college, or even starting their retirement fund.
10. Teach them the risks of credit cards and loans
One of the most significant risks of financial independence is the temptation of credit cards and loans. Fortunately, most banks won't offer credit cards for teens. However, as soon as they turn 18, they'll receive many offers of a new credit card, auto loan, or even mortgage loans.
While most people will need to take out a home loan and open a credit card at some point in their lives, you should discourage your teenager from taking out credit before they're ready.
Using your home equity loans as an example, get a mortgage calculator out and show a teen how much each mortgage payment costs. Understanding the large sums of money involved and the financial responsibility of credit products should ensure they only apply for loans and credit cards when they are ready.
11. Get them saving for retirement young
While retirement planning may seem like a long way away when your teen is only 15, the sooner one saves money, the better off they will be. Of course, when teaching teens about money, it will be challenging to encourage them to see such long-term goals. It might be a good idea to set up a savings account for them to deposit minimal amounts of money.
For instance, out of your teens' budget, suggest they put $1 every month into their retirement fund. Such a minor amount shouldn't infringe on other goal-setting but will start their retirement fund early. Use a savings calculator to show your teen how much $1 a month will grow.
What's the 50, 30, and 20 budget rule?
If you're looking for good budgeting for teens strategies, it's sensible to teach them the 50, 30, and 20 rules.
- 50% of their earnings should go towards their needs.
- 30% of their earnings should go towards their wants.
- 20% of their earnings should go towards their savings.
Encouraging budgeting for how they spend their money will promote good money management skills. As school students, they may not have many expensive needs. Therefore, you could suggest they use the surplus to save money for future needs. The 50, 30, and 20 rule is a simple budget that teaches your teenager the value of money.
College savings and student loans
Perhaps the most significant expense in your teenager's life is saving for college. When they're young, begin building a college fund for them. Paying for college is a big financial commitment, and it's best to help them avoid student loans. Each loan payment could cost a lot in the future.
When you teach your teenager about money, use college savings as their long-term goal. It's far enough in the future to count as long-term but near enough for them to see tangible rewards as a college student.
When should young people start saving for retirement?
People in their twenties, thirties, and forties ask, "when should I start saving for retirement?" The truth is, there isn't a perfect time. The earlier, the better. However, if you struggle at managing your money when you're young, you may not be able to afford to save.
Parents should teach their kids to save for retirement as early as possible. As we suggested, small and regular savings are perfectly okay. When your teen starts online banking, watch how they are spending money. Are there unnecessary expenses that could go towards a retirement fund instead?
Learning to take control of your finances is an important life skill. When your teen understands how to save, spend, and start investing in their personal finance, they'll have a better start in life. Everything, from buying a car to buying a house and retirement savings, requires money management skills. So, start the conversation about money matters today.
The post Eleven Tactics To Let Teens Know About Money Management appeared first on Due.
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