Teaching teens isn’t as simple as ABC because they can think independently hence make their decisions. However, whether they’re making some money on their own or thinking about financial independence, you can guide them. To help your teens make better money decisions, here are some useful tips.
Starting With The Basics
Starting with the basics entails knowing the definition of terms. For example, does your teen know the difference between actual expenses and expected expenses? Saving towards a short-term or long-term goal? How to place needs over wants? If they don’t, it would be best if you start here. They should also be familiar with how money works.
Helping Them Manage Their Money
Helping teens manage their money starts from involving them in money discussions. You may consider allowing them to be a part of the family’s monthly budgeting scheme. This tells and shows them money management tactics.
When you constantly involve them, they have a clear understanding of how much goes into what. Consequently, you can use that as a guide to help your teens manage their own money. For example, when a teen understands that taking care of education comes before eating out, they learn how to account for every dollar.
Research shows that teens spend about 82% of their income on clothing, cosmetics, and transportation. While these are essential aspects of daily living, teens will spend better when they know about budgeting.
For every dollar earned, you can teach them to set money apart for each goal by allocating their funds. These could include savings, expenses, investments, and charity, or the 50/30/20/10 rule.
An easy way to explain the 50/30/30/10 rule is that 50% of their income goes to the essential items, 30% for more important spendings, 20% for moderately important expenses or savings, and 10% for the least important expenditures.
You can also consider using money-saving apps that could help them stick to a budget. That way, they can reuse the app. Choose an app that’s engaging and helpful in tracking their progress.
Help Them Figure Out More Ways To Make Money
Encourage your teens to balance their budget. Spending should not exceed the income. If they do, help seek ways to cut back on their spending or increase their income. They can boost their income by taking extra jobs during the holidays or their free time.
Teens have a lot of free time on their hands with autumn break, summer, winter break, and spring break. With this, help them make some money. Additionally, help them start a business that ultimately helps them make a profit.
Consider Giving Them Access To A Debit Card
The thought of getting prepaid cards for teens may appear cringy to some parents. However, it is an excellent way to teach your teen financial independence. After they know about budgeting, this is the best time to open an account for them.
You and your spouse will be listed as guardians of the account. Educating them on how not to overspend is even easier. You have to show them how much each withdrawal costs and how it could affect their compound interest.
Furthermore, you can provide them tips on how to make reasonable purchases online. To be on the safer side, set a withdrawal limit that would not put their account in jeopardy.
Teaching your teen about money could be a daunting task, but it is always worth it in the end. Financial literacy is a skill that people sharpen over time. Parents play the most vital role in shaping their Teens’ financial habits. Help them learn contentment so that they can handle their financials effectively.