Last week guest blogger Nichole Coyle shared some ideas on how to help your younger children (age 3-12) understand money, financial responsibility, savings, and more. This week, she’s sharing some ideas on how teaching your teen about money can help them succeed as they become an adult.
If you read last week’s blog post, you know we talked about money jars and teaching your young children how to allocate money to save, spend, and give. We can take it a step further because they are older (and hopefully) more responsible!
Give Them Control
One of my favorites ways to help teens learn to manage money is to give then a little bit of control over their finances. What young adult 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 for them 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 particular circumstances, or if your child seems to do well with this sort of opportunity, give them a budget for other things. Maybe you have money set aside for shoes, video games, or something else that you would typically buy them anyway. By handing over some of that control, they are learning 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.
Talk about Budgeting
As your teenager gets older, 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 significant amounts of money responsibly.
Talk about why buying an older, reliable car with money saved up vs. buying a brand new car with a hefty monthly payment can 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 to have them sit down with you 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 altogether as they get older.
Talk about Different Accounts
Talk with your teens about the responsibility of managing both a checking and savings account. FFCCU’s Club Ignite is an excellent resource as your teen starts to manage money. They can open their own checking account with a debit card and a savings account (or even CDs or money market accounts) to allocate funds for later.
One of my favorite savings tips for anyone regardless of age is to put a name to the money you are saving. Your teen may have a general savings account, but he or she also wants to save for college and a newer car. They can open individual accounts, each titled with its purpose. This will help them to 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 as they move closer to a savings goal!
Talk about Earning Money
Most teenagers have free time between summer break and the various school breaks they get throughout the year. 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 a retail store, fast food restaurant, hosting or busing at a restaurant, babysitting, etc.
Talk about Credit Cards
Explain how interest accrues if the balance isn’t paid off each billing cycle. Talk about using credit wisely and how 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 and are finishing up high school and entering college, don’t hesitate to bring them with you to meet with your financial professional. Doing this is an excellent opportunity for advisors like myself to teach the current generation about essential investing 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 had started 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 in the Long Run
Teaching your teen about money isn’t always easy, and they don’t always want to listen to their parents. But by educating them a little at a time and with 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.
As always, if you have any questions and would like to discuss this topic or any other financial topic, please don’t hesitate to contact me! If you don’t want to miss a blog post from me, sign up here for a monthly reminder and link to my blog post.
Nichole M. Coyle
CERTIFIED FINANCIAL PLANNER™
20333 Emerald Pkwy
Cleveland, OH 44135
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