Helping your teenagers understand how to have secure and successful financial futures is one of the most rewarding things for you as a parent. By working with your teenagers learn and follow these tips, you’ll give them more experience and confidence in money management. These tips will start them down a better financial road their whole life.
1. Make sure they have steady income.
The first element in helping a teenager learn about money management is to work with them to establish income. One of the best ways is to encourage them to get a job. Or, if they are highly involved in sports or other high school activities and don’t have time to work, set them up with a weekly or monthly allowance.
2. Limit them to spending “their” income.
Once your teenager has income, make sure they use it for most of their personal expenses. This helps them understand that they have to control their spending, and not go over their budget. If you give them too much extra money, they won’t understand they have to limit their spending.
3. Start a savings or checking account.
By having a bank account, you can teach your teenager how to make regular deposits, save money and keep their bank balance away from overdrafts. In addition, it can help your teenager learn about online banking and using ATMs.
4. Help them set up a budget.
Sit down with your teenager and help them set up a budget that fits their income. A budget will help them understand that randomly spending money isn’t a good approach. By creating a realistic budget, they can also set short- and long-term financial goals.
5. Encourage savings.
Learning to save is one of the most important elements of money management. Sit down with your teenager and recommend they save 5 percent to 10 percent of their income. Help them understand that by saving money now, they’ll have less financial worries in the future, and will have funds to help make major purchases, such as a car or college tuition.
6. Recommend they save when shopping.
Another great way to help your teenagers learn about saving is when you’re with them at a store. Help them look for the best value items, lower prices and even use coupons. In addition, have them go online and see if they can find even lower prices. It’s also good to recommend that sometimes they wait to buy an item until it goes on sale.
7. Cut back on spending when possible.
Give your teenager a new perspective on spending. Help them understand that, if possible, it’s a smart approach to spend less. An example would be instead of spending $25 on too much of a restaurant dinner, they could limit it to just $15, and have $10 to add to their savings.
8. Focus on planned purchases, reduce impulse purchases.
Encourage your teenager to shop with a specific list of items they need. This avoids impulse buying, which can lead to much higher expenses for things they really don’t need.
9. Set goals.
It’s important to spend time with your teenager to help them decide what their future goals are, and how they can achieve them financially. By having a specific plan, they’ll have a much better opportunity to meet their goals.
10. Review their financial statements.
Teach your teenager that each month, they should go over the details on their savings or checking account statement. This will help them understand and analyze their spending habits, and will help them make changes that allow them to reduce spending and increase savings.
11. Discuss family finances.
A great way to give your teenager a bigger picture of financial management is to talk to them about your household finances. Talk about your income and how you manage it, including monthly expenses, daily costs and saving for retirement with your 401k or other retirement plan.
12. Encourage them to keep debt low.
One of the worst financial conditions is having extremely high credit card debt and other loan debt. Explain to your teenager that it’s important not to take on any debt that isn’t absolutely necessary. By keeping debt low, they’ll be in a much better, long-term financial situation.
13. Recommend they start their retirement savings as early as possible.
It’s beneficial to let your teenager know it’s never too early to think about retirement. Encourage them to sign up for a retirement saving plan at their first career job. Explain to them that the younger they start, even depositing small amounts, can eventually add up to a wealthy, secure retirement.
The more you talk to your teenagers about money management, the better decisions they’ll make. Use the tips listed here to get started, and keep talking to your teenager about all kinds of financial topics.