In honor of National Credit Union Youth Month, we’re back with part two in our series about youth financial literacy. This week, certified financial planner™, Nicole Coyle, shares tips to get your teens participating in their financial future. Want tips for younger kids? Check out last week’s post here.
Financial Literacy for Tweens and Young Adults
Give Them Control
One of my favorite ways to teach teens about money is to give them a little control over their finances. What pre-teen or teenager doesn’t want to have more control over their lives? You can start this on a simple level and take it as far as it makes sense for your family.
Instead of taking your child back to school shopping for clothes and footing the bill, set a budget and give them the cash. They’ll have to make choices to decide what is most important to them and find ways to make their budgeted amount stretch the farthest.
You can do this for practically anything. Maybe you have money set aside for shoes, video games, or something else that you would typically buy them anyway. Handing over some of that control teaches responsibility, basic budgeting, cash management, decision-making, planning, and prioritizing. And because these are funds you would already be spending, you don’t have to cough up extra cash for this to work.
Down the road, as your child gets older and starts working at their first real job, they will already have basic knowledge of how to spend their newfound income wisely.
Talk about Budgeting
As your teenager gets older, you can also talk about your household budget (get as in-depth as you feel comfortable). Involving them in how you budget for expenses can help them understand how to manage more significant amounts of money responsibly.
Talk about why buying a used, but reliable car with money saved up vs. buying a brand new car with a hefty monthly payment will allow them the flexibility to continue to save for college, a senior trip, or other savings goals your child has.
Once you talk about your budget, you can help your teen create one for themselves. Most kids this age don’t have many expenses, but it’s still a great exercise as they get older. Sit down with them regularly and review what’s working and what is not.
The Bonus: You don’t have to have the perfect budget or have your finances entirely under control to do this! Even if you are struggling to get out of debt, teach your kids about that! They will learn valuable lessons about money management or how to avoid unnecessary debt as they get older.
Talk about Different Types of Financial Accounts
Talk with your teens about managing both a checking and savings account. FFCCU’s Club Ignite is an excellent resource as your teen starts to collect money. They can open their own checking account with a debit card and a savings account (or even CDs or money market accounts).
One of my favorite savings tips for anyone, regardless of age, is to put a name to the money they are saving. Your teen may have a general savings account, but they also want to save for college and a car. They can open individual accounts, each titled with its purpose.
This will help them think twice before taking money from a college fund to buy a new video game. It’s also a great motivator to add funds and watch them move closer to a savings goal!
Talk about Earning Money during National Credit Union Youth Month
Most teenagers have free time during summer break and the various school breaks. Help them find a job or start their own business. There are many job opportunities for teenagers, whether it’s yard work around the neighborhood, working in retail, a fast-food restaurant or sit-down restaurant, or babysitting. Once they earn their own income, control over finances will become even more relevant.
Talk about Credit Cards
Explain how interest accrues if the balance isn’t paid off each billing cycle and how using credit wisely and building credit can be a good thing. But also talk about being cautious because it’s easy for a $5 sandwich to turn into a much more expensive lunch if they allow that balance to carry over for a few months or longer.
Bring your Teen to Meet your Financial Planner
Finally, as your teenagers get older, finish up high school, and enter college, don’t hesitate to bring them with you to meet with your financial professional. Doing this is an excellent opportunity for advisors to teach this generation about basic investing and retirement savings and answer any questions they (or you) have about money management and other financial topics.
I have met many young adults who are just graduating high school or are in college and have slowly started saving for retirement. Can you imagine how much farther ahead you could potentially be if you began saving even a small amount when you were 18? What a great way to give your child a head start towards their retirement and future financial goals!
Financial Literacy Pays Dividends (not just during National Credit Union Youth Month)
Teaching your teen about money isn’t always easy, and they don’t always want to listen to their parents. But by showing them real-life situations (not just concepts and theories), you can provide them with valuable information that can help them be responsible and help set them up for success during National Credit Union Youth Month.
If you have any questions and would like to discuss this topic or any other financial matters, please don’t hesitate to contact me!
Nichole M. Coyle,
CERTIFIED FINANCIAL PLANNERTM
20333 Emerald Pkwy, Cleveland, OH 44135
Securities and advisory services offered through Cetera Advisor Networks LLC, member FINRA/SIPC, a Broker-Dealer, and a Registered Investment Advisor. Cetera is not affiliated with the financial institution where investment services are offered or any other named entity. Investments are: Not FDIC/NCUSIF insured * May lose value * Not financial institution guaranteed * Not a deposit * Not insured by a federal government agency.