How to teach your teen to be financially responsible?
Managing money is a life skill that every person needs to learn. It’s important to teach your teen how to be responsible with money before they move out of the house. The lessons you pass on could keep them from falling into financial trouble.
Set up a budget
Your child should have a solid grasp on how to manage a budget before he leaves home. Whether he has a job or receives an allowance, teach your child to track what money is coming in and what is being spent. Help your child set up a budget that prioritizes needs over wants, and teach him early to put money in savings before deciding how much to spend.
Credit cards make it easy for teens to view spending money as something they don’t have to manage. Even debit cards can cause problems if your teen doesn’t track spending and forces his account into the red. That’s why it’s important that your child knows how to budget and that there is no such thing as free money. Debt has to be paid off, and that has to be factored into a budget.
Asking your teen to put a certain percentage of her earnings in savings is a great way to teach a lifelong lesson. By sweeping money into a savings account before anything is spent, your teen will develop the habit of living on less than they make while also building a nest egg.
After your child understands how a basic savings account works, introduce her to other savings tools she will need throughout life. You can talk about money market accounts, certificates of deposit, and retirement accounts. Explain the importance of investing in a 401K or another retirement account from a young age to reap the benefits when it’s time for retirement.
Help them see real prices
Kids focus on the prices of things they want. They know how much a video game or outfit costs because they are saving up for these items. However, your teen needs to understand how much basic items cost, like groceries, gas, and utilities. To make this happen, let them do some of the bill-paying each month.
Though they will be paying these bills with your money, they will benefit from sitting down each month to see how everything adds up for a household. Send your teen grocery shopping and tell them to stay on budget. That’s a fast way for them to recognize the benefits of meal planning and looking out for sales.
Don’t make talking about money awkward. Instead, open up about what you spend money on each month so your teen knows what to expect. It’s also important to discuss the items you have to plan and save for so your child will understand that you don’t impulse buy whatever you want.
Help them understand debt
Teens often think buying whatever they want is a form of freedom, but that’s because they don’t understand the damage debt can do. It’s essential to teach kids that financial freedom doesn’t mean being rich or having the most expensive things. It means living within their means, whatever those means maybe.
However, some people have a hard time sticking to this advice. Make sure your teen understands that if they make a mistake, all is not lost. They can look into debt relief in Canada or their particular locale to salvage their credit and get their spending back on track. It’s important that your teen knows to seek help when debt becomes an issue instead of sinking into further financial ruin.
Getting help to eliminate debt is often the only way people can make a fresh start. Obviously, it’s better for your child to avoid sinking in debt, but make sure they know help is available if they get in over their heads.
Be the example
You can spend as much time as you want to talk about money, but teens pay more attention to what they see. If you are not following the financial advice you are giving them, it’s going to be hard for them to take you seriously. Be a good role model when it comes to money so your teens can see how it’s done.
Teach your teens how to handle money before they make needless mistakes when out on their own.