The two words, “teens” and “finances” do not really go together and you probably just assumed that your teen would pick up good personal finance habits at school or paying attention to you.
Unfortunately, it is not that easy. Many, or should we say most, schools do not teach much about personal finance or finance in general. A bit of homeschooling is in order. If you do not take the time to teach your teens about finances, they may enter the real world with a false sense of what money, credit cards, and loans are. Not only will this lead to trouble, it will set them up for financial failure within just months or years of them living on their own.
Below, we will go over some tips that you can use to teach your teens about finances and how they can set themselves up for a prosperous financial future.
Try Financial Games First
One of the best ways to teach teens about finances is to allow them to learn more about them. There are online games that will teach your teen about how to manage money, what it is like to spend money, and so on. One site that you may want to check out is Practical Money Skills. This website allows teens to play a variety of money themed games such as the Road Trip to Savings game or Financial Football. These games will test their knowledge and also challenge them to make money decisions on the spot.
Teach Them to SAVE
It is never too early to save money and you should drill it into your teen’s head that they need to save. Anytime your child receives a paycheck or gift money, encourage them to save at least 10 percent of that money and put it into a savings account. While 10 percent may sound like a lot, it is not and is very reasonable. For example, 10 percent of $100 is only $10, but it will add up over time and is a good start to learning about saving.
Set an Allowance and Give Them a Bill to Pay
You do not want to just hand over money to your teen because they will not appreciate the money in their hand. When you have to work for something, it means more to you and it is the same for your teen. You should create a chore chart or some type of chart that will allow your teen to earn money for themselves throughout the week or month.
In addition, give your teen a bill to pay. For example, maybe have them contribute a small amount towards groceries or have them pay for their own cell phone bill. This way, your teen will learn how to earn the money and what it feels like to pay a bill. It will also teach them responsibility as they now have a debt to worry about.
Discuss Student Loans
You do not want your teen to enter into college and think of a student loan as free money. Many parents never even talk to their children about college financing and this leaves those teens in debt. Fortunately, you still have time to talk to your teen and should do so. Explain to them what student loans are and make sure they know that it is not free money and it needs to be paid back plus interest. Better yet, discuss the cost of college, too. This will a direct impact on how many student loans they may take out.
The more your child knows now about college finances, the better. This will also get them thinking about scholarships and grants that may be available to help offset the amount they need to pay for their education.
Talk about Credit Cards NO MATTER WHAT
Talk to your teen about credit cards and explain to them what they are, how they work, and the serious consequences for mishandling them. There are many young adults who never learned much about credit cards, and now they are sitting in a hole of debt that is thousands of dollars deep. There are plenty of helpful resources out there that offer tons of useful information on credit cards.
You should make sure your teen knows what happens when they use a credit card and the damage that a poor credit score can do. In fact, a bad credit score can mean you cannot rent an apartment, buy a car, or obtain a mortgage.
Final Thoughts on Teaching Teens about Finances
It is important that you teach your teen about finances because it will pay off in the end. Start the talk early on and allow your teen to practice as much as possible with your help.