Within the next decade, today’s generation of teenagers and young adults will have more purchasing power than millennials and boomers combined. But given the lack of financial literacy programs in schools, plus the ever-evolving financial landscape and methods on how money is produced, used and distributed, parents’ involvement in their children’s financial education is more crucial than ever, especially during their teenage years. Talk to them about money management for teens and help them develop positive financial habits earlier in life, so when it’s time for them to make their own financial decisions, they’re ready.
Why Financial Literacy is Very Important
Financial literacy enables people to effectively manage their finances and become self-sufficient. Saving, earning, smart spending, debt management, investment for teens – learning these basic concepts will help your children understand how money works before they spend it.
Far too many people have realized the true value of a dollar a little too late and jeopardized their financial future in some way or another. Through financial education, your children will have a better relationship with money and grow up to become financially responsible adults.
How to Teach Teens About Money Management
Instilling in your children the value of financial responsibility and encouraging them to practice good money habits while they’re still young are two of the best things you can do to prepare them for success in the real world.
These tips will help you kickstart your teenager’s financial literacy journey:
1. Begin NOW!
People tend to keep habits they develop while they’re young. Thus, the earlier your kids learn about good money habits and put them into practice, the higher the chance that those lessons will stick with them until adulthood.
Even if your teenager may seem initially uninterested in the “money talk”, just keep at it. Sooner or later, a topic may pique their interest and change their mind. Also, these conversations don’t have to be formal. You can randomly open a discussion when the situation calls for it. For example, you can teach them about comparison shopping while at the grocery store or about the essence of saving and delayed gratification if there’s something they want to buy, but can’t yet afford.
2. Introduce budgeting basics.
Of all the tips out there on money management for teens, creating a budget and sticking to it might be the most useful. A spending plan will give your teenager a better picture of their finances, and this awareness of how much money’s coming in,- and going out,- and where it’s going can help them become more mindful of their spending habits.
When teaching your children how to build a budget, stress the importance of categorizing their expenses into needs versus wants to help them keep their priorities in check.
3. Open a savings account.
When you’re done creating a spending plan, discuss with your children the value of saving for the future. To drive the message home, have them open their own savings account; – one with a debit card for kids, so they also learn how digital money works.
If your teenager earns money from doing extra chores or part-time jobs, suggest having the funds automatically deposited to his or her account to avoid unnecessary spending. Once they have plenty of money saved, you can then begin talking to them about investment opportunities and how these can help their money grow even faster.
4. Allow them to learn from experience.
Give your teenager more autonomy over their money and how they spend it. Doing so will teach the valuable money management skills that will serve them for the rest of their lives.
Of course, you can’t expect them to not make mistakes. They’re teenagers, after all. Don’t be too hard on them if they end up blowing through a week’s allowance in one day or spending a lot of money on a useless purchase, but don’t hand them more money either. Instead, help them understand what they did wrong and the consequences of their decision.
5. Give them opportunities to earn.
It’s critical for children to understand early on the work that goes into making money and that money is not an infinite resource. A simple way to put this into practice in your teen’s life is by offering them extra spending money in exchange for doing household chores.
If your child is already in high school, encourage him or her to find a part-time job or start a small business. Money-making opportunities can give teenagers a sense of purpose and develop in them a deeper appreciation for the value of a dollar.
6. Walk the talk.
Kids tend to pick up the habits of their parents. Whether you’re aware of it or not, your child is observing you, including the way you handle your finances. Thus, the best way for them to learn about financial responsibility and money management for teens is by setting an example.
This is also the perfect time for you to examine your own money management skills and spending habits as parents. Understanding your relationship with money will allow you to take full control of your finances and make necessary adjustments that will put you in a better financial position and inspire your children to do the same.