If you are a parent or a guardian, teaching teens manage money is perhaps the most important thing you can do.
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.
4 easy tips for teaching teens manage money
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?
Those are such useful pointers. I needed that reminder. We did try to set up a piggy bank for the kids but it didn’t quite work because they didn’t have the patience to watch it fill up :-(. I thought it was early days and left it at that. Maybe it’s time to give it a second shot.
Obsessivemom recently posted…Notes from a self conscious soul – 1
very pertinent points vidya..
would help even adults.. 🙂
Glad to see your tips Teaching kids to manage money. there are many other ways for a teenager to make money. All you need is a good idea and some free time. Once a teen learn how to earn money and save it will helpful for them once they reach on their career. Also they will give more value (respect) before they expanse.
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Oh Vidya! This is right up my alley since I am a Credit Counsellor and I commend you for the points you have made. I have worked at my job for over 24 years now and have seen an increase in kids having huge debt by the time they are 23 yrs old! This does not include student loans. I see more and more kids stay at home until they are in their 30’s and parents are enabling their kids. I have had many parents tell me their kids can’t work because they are in school and they are 22! When I tell them I was 12 and was picking fruit, they look at me as if I am insane. I think basic money management should be taught in grade school. There is so much credit out there now that kids just ask their mom or dad to use their card. In this country, when kids as young as 17, go to college or University, the banks are set up in the halls and push the credit cards. In fact, there are pamphlets with a list of cards that they can check mark off and they get them all at once. The usual cards are Capital One and MBNA with Canadian Tire Options MasterCard and President’s Choice. Tell your son that if he owes $2,000 on a M/C or Visa at a rate of 19.5% which is typical, it will take him 24 years to pay it off with minimum payments. If he would have a card at a retail store like Home Depot, it would take 36 years to pay it off because the interest rate is 28.8%. It is so scary and kids are not thinking 2 weeks ahead never mind 2 years. The average person in my country has a car loan(10%), a credit line(6%), an overdraft (21%) and about 6 credit cards which vary from as low as 9% up to 28.8%. This does not include finance companies with interest rates of 34% or the dreaded payday loans that have an interest rate of 59.95%. So That is some stats and I am so happy you brought this up
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I was thinking of you all the way while writing this post, Birgit! I’ve heard from my friend that taxes are horrendous in Canada! And yes – these days kids have so much commerce pushed at them it is not funny. My son has often asked why I always use only one credit card even though we’ve received a bunch. And I tell him that carrying cash is really the best thing as it keeps one in control – but credit cards are useful in an emergency. Problem is, all these cards talk about savings and offers and point balances – and that’s so tempting for people. They never realize they’re playing with their own cash. With almost all children carrying mobile phones, marketers tap these young people on the go – and it doesn’t really take long for them to curious click one of the links and get hooked in.
Thank you for your valuable comment – reality is quite scary! Hugs!
Vidya Sury recently posted…Teaching Teens to Manage Money
Awesome post! Are you up for a blog hop sort of nomination? I’ve been tagged with the Versatile Blogger Award and would like to pass along the fun. You can find the information at my Darla M Sands blog post for July fourth (which I’m still working on as I leave this comment ~blush~). Best wishes!
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