It’s never too early to start teaching your kids about money. Encourage them to collect their allowance in a piggy bank whenever they start earning one. However, money management lessons are especially important as your children become teenagers teetering on the edge of adulthood.
Give them the skills they need
There are specific skills that will give your kids the lifelong gift of financial freedom and teach them smart money habits before they go out on their own. Here are seven money management tips to get you and your teen started:
- Be open about your family’s monthly income and expenses. Your teen probably has no concept of basic living expenses costs. Share actual facts and figures with your kids to show how you prioritize your spending between “needs” and “wants.”
- Help them get them a bank account. Once your teen has a job and is receiving a regular paycheck, it’s time to open a checking account. Talk to them about picking a bank, discuss the responsibility of having a debit card and show them how to use online banking tools to check their account balance regularly.
- Review monthly statements together. Your teen may not realize they’re spending $50 a month on junk food, but those $1.50 purchases can really add up. A review of monthly statements can be a great way to point out spending patterns and discuss money management.
- Show the impact of savings. If there’s something your teen wants to buy, whether it’s small, like concert tickets, or big, like a car, sit down and make a savings plan together. Figure out what amount they’ll need to save over how many months to reach their goal. Encourage them to set a monthly savings goal.
- Discuss how to make smart purchases. Even if your teen knows exactly what he or she wants, show him or her how to do a cost comparison, read product research and check consumer reports. He or she might figure out another choice is a better value.
- Start out with small monthly expenses. Giving your teen a little financial responsibility each month can help create purposeful spending habits that will serve her or him well later in life. Whether it’s gas, their cell phone or even just the monthly Netflix subscription, this can be a great teaching tool.
- Teach your teen about the rewards and dangers of credit cards. To an unprepared teen, their first credit card can feel like a license to spend. Help her or him to understand the advantages of building good credit while also explaining the risks of acquiring credit card debt.
Remember that this is a learning process full of teachable moments and, inevitably, a few setbacks. Budgeting isn’t easy, but your teen will be grateful to have financial planning skills once he or she has to do it alone. Lead by example, help them practice and watch them transform into budget-conscious adults.