When it comes to money management, teens are the most challenged. The primary reason behind this is their lack of experience in the field. Much of the blame for this should be placed on the adults for failing to expose their teens to important money management skills. The sooner you teach your teens about the importance of managing their money, the better it will be for both of you. This article sums up some crucial money management tips for you to pass on to the teens in your life.
1. Make Use of Bank Accounts
As parents, you want to teach your kids how to open and manage their bank accounts from a young age. Afterward, you want to start encouraging them to save whatever they get or make in their bank accounts. Teach them the importance of saving. For the best results, you should also supervise how they manage their accounts. Monitor their savings and spending. If possible, you can also open an account with joint ownership. This gives you shared access to their account. Also, stress upon your teens the importance of using their bank accounts to make purchases and avoid carrying or using cash.
2. Teach the Importance of Budgeting
Budgeting involves a lot of cash flow management. The ability of your teen to monitor, analyze and even adjust his/her personal budget will help offer him/her financial security in the future. Also, let your teens know the importance of budgeting and how it can come in handy later on during financially difficult times. Life is like a rollercoaster; it has its simple and smooth times and the difficult and stressful times too. A budget helps your teen prepare for both situations, especially the difficult financial times.
3. Save, Save, and Save Some More
You can never stress the importance of saving enough to your teens. The younger people start saving, the more they can enjoy a financial safety cushion later on. Saving always allows your teens to have money even when they don’t need it. In all fairness, this is much better than needing the money and not having it. Discuss the importance of financial goal setting with your teens and stress the need to save for the future. When teens save for something and ultimately get it, it changes their thinking about spending their money. Remember, savings can be used for both short and long-term goals.
4. Teach Teens About Credit Cards
Exposing your teens to the world of credit and debit cards at an early age is also financially beneficial. Credit cards are a useful and necessary financial tool. However, they can also get you into a financial crisis with overspending. Eventually, you end up spiraling into debt, and that is where financial troubles start. So, before you engage your teens with credit cards, explain to them how it all works. Discuss benefits like rewards points and establishing credit. However, you should also warn them of the potential dangers of misusing their credit cards and how various factors can damage their credit score.
5. Teach Teens About Wants vs. Needs
When it comes to money, it all boils down to values. You need to teach your teens how to value money. Plus, you should teach them the importance of only spending their money on what they value. You also want your teens to know the difference between what they want and what they need. It could be helpful to discuss impulse buying and why it’s not the best practice. A teen that can control impulse buying has a better chance of saving more and becoming financially stable. For example, you can ask your teens to rent out a movie and watch it with family and friends instead of going out to see it in the theatres. Soon, they ’ll see the relevance of these simple practices and how it benefits them financially.
6. Teach Teens Insurance Basics
When it comes to financial security and management, you also want to teach teens the importance of having insurance covers. For example, if you have a teen brother, then you may want to start with car insurance. Explain to them the purpose of insurance and its importance in covering large, unexpected costs. Help them review the pros and cons of various policies. Lastly, give special attention to deductibles as it’s an area that can get very confusing.
7. Teach Teens About Retirement
Most teens don’t give any thought to retirement since they believe that they still have a lot of time in their hands to plan for it. What they may not fathom is that the earlier they start planting their retirement seeds, the bigger the impact it will make for them in the future. Retirement is the biggest expense we all have to save for. So, the sooner your teens understand this, the better and easier it will be on them. Time is on their side; they still have many more years left before retirement. They should get a head start and begin planning for those golden years.
8. Teach Teens How to Invest
One of the best and most important things teenagers can learn is how to invest. And it is not just about investing, but investing responsibly and being successful in the process too. When teens are exposed to investing early on, it gives them plenty of time to experiment, save, and nurture their investment skills. The advantage here is time. And time is the most powerful weapon any investor wants to have in his/her arsenal.
The earlier teens learn and understand the importance of managing their money, the better it will be for them. Studies have found that teens who learn and embrace these important money management skills at an early age enjoy more financial success compared to teens that don’t. So, don’t let the teens in your life waste their time or money. Do them a favor and show them these eight money management tips.
By Christopher Kay