I have a confession to make. My son is not money-savvy. Although he has been carrying money and has occasionally spent it in school for emergencies, he hasn’t independently managed an allowance, possibly because the school he went to for 12 years has been within walking distance from home. We never encouraged him to buy stuff and eat and he always carried lunch from home.
But now, I realize we should have probably paid more attention to it, especially now that he has started college and needs to be more independent. If he needs to borrow money for school will he know how to refinance those student loans later? This thought was emphasized when their English professor encouraged them to get part-time jobs. And old enough to work means old enough to manage money, right?
Teaching kids about money is one of the best things a parent can do to help their child gain a firm financial foundation. Yet, this is a lesson some parents fail to teach. The general tendency is to focus on other “important” life lessons, such as teaching their children to be upstanding citizens or preparing them for life in the real world. However, parents must recognize the benefits of learning about how to manage money early.
The truth is, children may or may not learn about money while in school. So if you don’t provide them with a financial education, they could graduate high school not knowing how to write a check or budget. Fortunately, it is never too late to become your kid’s money guide.
I know many parents make the mistake of assuming that conversations about children and money don’t go together. Truth is, children are never too young to learn the basics. According to CreditRepair.com, it becomes even more important for kids to know about money as they become older.
When children learn how to manage money, they’re more likely to make smarter financial decisions as teens and adults. Whether you give your kids a weekly allowance for doing chores around the house or they have a part-time job, take the time to teach smart spending habits. The lessons they learn at a young age can stand them in good stead through adulthood.
Here are four ways to be your kid’s money guide and teach your teenager to manage money and thereby, smart spending.
- Open up a savings account for your children
This is the first important step. I still remember my first “Kiddy bank” account and my pride at depositing a little bag of coins that I painstakingly counted. When I was 18, I had a job as a French tutor. I’d get my hair in a tangle stressing over how to spend it. These days, the trend with teens who work is to spend their money on clothes, electronics or hanging out with their friends. This is okay, but it is also important for them to understand that it is not okay to spend all their money on fun stuff.
When kids are old enough to get an allowance or a job, it is the right time to open up a savings account for them. Encourage them to deposit 10% of their earnings into a savings account. This way, they will get into the habit of preparing for a rainy day from an early age. It will be easier for them to stick with this routine once they are adults living on their own, which means it will be easier for them to build an emergency fund or save for a vacation.
- Show teens how to prioritize their spending
The best way to do this is to make them realize that even though they live at home, they must start taking care of one or two of their personal expenses. This can be their cell phone bill or their vehicle insurance. This will teach them responsibility. Teach them the value of making a budget and make it a habit to put 10% of their pay or allowance into a savings account. Urge them to set money aside for important expenses before deciding how much to spend on extras like entertainment and shopping.
- Teach teens how to comparison shop
Most teens don’t have a lot of personal expenses and so, they tend to buy items at full price when they need them. However, this costly habit can follow teens into adulthood. Teaching children the importance of waiting for sales and discounts, and showing them how to comparison shop to maximize their savings and get more value for their money pays off in the long run. I am doing this right now with my son, and he has proved to be an apt pupil by looking around for the best price for the same books before ordering them.
- Make sure they understand the dangers of credit cards
So yes, my teen might be too young for a credit card, but no one is too young to learn smart credit use. It is critical to discuss the consequences of bad credit decisions, such as the risk of a lower credit score. Also important is an emphasis on only having one or two credit cards, and only charging what one can afford to pay off each month. While at it, it doesn’t hurt to teach the importance of shopping around for the best interest rates when applying for a credit card or a loan.
Point is, it is not necessary to wait until children become teenagers to start educating them about how to manage money. There are many fun activities to do with young children. For example, teach money math and use simple activities to help younger children learn the value of money while developing their math skills. Teach smart spending habits through example. After all parents are their children’s first teachers and children often imitate the money habits of their parents, so practising what we preach is the way to go!
Is your teen money savvy?