Teaching Teens About Finances
Parents are in a very influential position to teach their teenagers about finances and handling money before they are out on their own. Guidance on financial matters can help them avoid the lure of easy credit and the trap of overspending which so many young people can fall into.
Here are a few starting points to consider when coaching your teenager about financial matters:
Educate by example. Good fiscal management on the part of parents is the best way to show how finances work in real life. Do you tell your teen to save for the future while not setting aside money for retirement? Make sure to practice what you preach for the best results in making financial lessons stick. Do you finance too many purchases with ever-increasing debt, or does your lifestyle show financial restraint? Children will learn life-long habits by watching their parents' fiscal actions and choices. You can also recruit financially-savvy family members to share their knowledge with your teen.
Make time for discussions. Add scheduled discussions to your monthly calendar to chat about the fundamentals of personal finance with your teen. When kids are younger, you can start with an allowance to teach them budgeting and saving skills. As they hit the teenage years, you can show them how to manage a checking account, use financial software, or use a beginner debit card. The teen years are also a good time to discuss the dangers of credit card debt, the miracle of compound interest, and the wisdom of living within one's means. Since we learn by mistakes, you may need to let your teenager flounder a bit while learning the financial facts of life.
Prep for the college years. When your teenager stands at the threshold of a university journey, it's time for a fiscal refresher course. This is an opportunity to talk to your student again about credit cards, budgeting, emergency funds, and long-term savings. You may want to help your child open an IRA and choose a bank if you haven't already by this point. This is also a good time to clearly delineate your financial responsibilities and those of your college student. You might establish a set amount that you'll each pay for certain school items or living expenses to ease them into adult responsibilities.
Becoming a financial grown-up takes time and practice, but you can give your teen a head start with some sage advice and good examples to follow. If you need additional guidance, please contact our office for an appointment.