Categories: Budgeting, Financial Planning, General Tips
Parents and guardians play a huge role in teaching teens about money and beginning to build their financial independence. Seemingly small acts can create a big impact on your teen in their financial journey. One simple way to start is to set a good example. Showing your teen what household bills need to be paid, explaining elements of your family budget, and making conscious spending decisions are all good ways to set strong financial examples for young people.
Planning for the Future
Help your teen launch their financial future by bringing them to a local financial institution to set up their own checking and savings accounts. While the process is relatively simple, it can be unfamiliar for teenagers. You can show them how to interact with each element of the financial institution or can request someone to guide them through how to set up accounts, how to use a debit card, what forms they may need, or how to engage with the team of tellers and other financial representatives.
A big part of planning for the future is making savings plans. Is your teen planning to go to college, looking forward to purchasing a vehicle, or hoping to travel in the future? If so, talk with them about how a savings plan can be put into action to achieve those goals. Putting a percentage of each paycheck or an annual amount toward savings to help with these goals is a great idea.
If your teen is headed toward college, talk about ways to pay for college. Loans are always an option, but getting a part-time job, choosing an in-state or community college, and applying for scholarships early are all great ways to lessen the financial expenses of higher education.
How to Spend Money
It is important to talk to teens about what to do with their money. You can talk about the value of saving money, when and where to spend what they have earned, and how else money can be used like for investments or community donations. Showing your teen what things cost—clothing, entertainment, gas, and other day-to-day expenses—is a helpful way to help teens begin to budget their earnings to plan for purchases they want and need to make. This can also help teens to begin weighing decisions about purchases, for example helping them to see that if they only have $30 available, that they could decide to either go to the movies with a friend or buy a shirt.
Donating to causes that they care about can also come into play here. Challenge teens to think about how they can use some of their money to help others, creating a habit of generosity for the future. Conversations like this can help teens develop their own financial goals and learn how to work toward achieving those goals.
Explain Financial Concepts
Although they might be more complicated, it’s also important to explain some of the more sophisticated financial concepts with teens. For instance, explaining a concept like compound interest now can help them grasp why saving early in their career is important. In a savings context, compound interest can help accounts grow more over time by earning interest on increasingly larger balances. Similarly, it can be a detriment with debt as the interest will continue to grow exponentially on unpaid balances due.
Entrepreneurship is another great concept to talk to teens about. Some kids start early with lemonade stands and dog walking ventures. Help your teen think about ways that they can meet needs around your home, neighborhood, and social network to begin earning money for their own creative, business-minded efforts.
The way that you approach financial decisions and money management as an adult has an impact on the way that your teens will learn about and begin to develop their own financial habits. Check out other tips and tools for teens here (link to other blog posts).