Tips for Teaching Teens Good Financial Habits
Now that school is out for summer and teens are finding ways to make money, it’s important to teach your teenager how to use the cash he or she earns as carefully as possible. Whether you’ve experienced the worry of debt yourself, or you’ve been close to someone who’s been overwhelmed by financial worries, you should know just how important it is to develop good financial habits early.
The following tips should provide the essentials for parents to teach their teen the basics of budgeting, the value of a dollar, and the importance of growing into a financially responsible adult.
- Leading by Example
Even before your teenager gets their first job, they’ll be watching you, their parents, for insight in how to deal with money. A good way to introduce them to financial responsibilities, is to get them involved in the budgeting process. This will help your teenager to learn how they might need to set financial priorities in the future, and make critical decisions about saving or spending. For example, you could:
- Sit down with your teen to discuss monthly income and expenses you deal with as a family. Explain to your teen how you define the difference between things your family wants, and things you need. For example, you need food, a home, and utilities, so bills and expenses for groceries will always take priorities over things you want, like a new television or vacation.
- Discuss the importance of saving – Teach your teenager what it means to be equipped with a rainy day fund, and how having extra cash on hand can be essential when facing unexpected expenses like medical emergencies or car repairs. At the same time, attempt to cut down on unnecessary expenses to show your teenager the difference small savings can make. For instance, put the money you would spend on a morning coffee into a savings jar that you can watch grow with your children.
- Talk about the value of a dollar, and what it stands for. If your teen works a low-skill summer job and makes $10 per hour, remind them that $30 for a new videogame represents 3 hours of their life. This gives them another way to look at spending choices.
- Research! Ask your teenager to get participate in comparison shopping and show them how buying cheaper foods from alternative grocery stores, or changing your electricity supplier can save you money over time.
- Creating Saving Goals
Your teens will want to splurge at some point. Instead of buying all the extravagant gifts they want as birthday or Christmas gifts, use one item as an opportunity to show your child how effective saving money can be. Maybe you save $4 a day on coffee. After less than four months, you’ve saved enough to buy a TV or a new cell phone! This will not only give your teenager the techniques he or she will need to be patient and caution in making large purchases later in life, but it will help to underline the value of their dollars.
While most teenagers don’t spend their days worrying about how they’re going to manage a down payment on a house, it’s worth learning that the more they can earn through hard work, the more they’ll have to spend. Asking your teenager to set a savings goal, such as a deposit towards a first car, will show them how much work actually goes in to getting those expensive items.
- Teaching the Consequences of Dangerous Spending
Finally, when your teenager does get their first job, and starts to earn his or her own money, you might find that they’re tempted to blow their paycheck on pointless purchases. As tempting as it can be for parents to let their children indulge their desires as a way of rewarding them for joining the working world, it’s also important to show your teenager that there are consequences for irresponsible spending.
For example, if your teenager is going to make extravagant purchases every week, make sure he or she knows that you won’t be there to bail them out with extra cash when they run out of gas or need money for a social event. Make rules and stick to them, so that your teenager can learn how to make important money decisions as early as possible.
To learn more about dealing with money responsibly, or overcoming debt through settlement and negotiation, contact our office for a free consultation.