Teaching Financial Responsibility to Teenagers

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Epictetus quoteYour teenagers can grow up with a bright future if you’re able to instill good financial habits into their lives.

Money management basics will help your children plan ahead and achieve their life goals more successfully.

Talking about money with your teenagers may seem a little strange at first. That’s why we’ve compiled these steps to explain budgeting, shopping, saving, and using credit wisely.

Budget Wisely

1. Monitor your spending

Have teenagers keep track of their spending for at least one month or more. This exercise may surprise your children with how much they spend on food, clothing, and entertainment.

2. Learn budgeting basics

Explain budgets as plans for determining their income and expenses in simple terms. You can also discuss how to make trade-offs and why it’s important to earn more or spend less to remain financially secure as adults.

3. Consider household expenses as ordinary

Show them a recent cable TV bill or your monthly car payment book. This will give your teens an early education on the cost of goods and services you use every day.

4. Manage your income

You can encourage your teenagers to start creating some of their own income to manage, as long as their studies remain a top priority. Support their efforts to find a summer job or contribute to an allowance they can appreciate and spend wisely.

Shop Carefully

1. Do some shopping together

One of the best ways to demonstrate value is to take your kids shopping with you. They’ll see you comparing prices for generic and name brand products at the grocery store, and you can look for special sales together that can save your family money.

2. Research major purchases

When it’s time to make a major purchase like a cell phone, ask them to do some research before they buy. Have them compare different plans and help them decide on the features they need as opposed to those they want.

3. Analyze materialism

Advertising ads bombard us with messages to consume more, buy new, etc.

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This is an opportunity to talk about moderation and basing your happiness on other values and sources rather than your possessions.

Save More

1. Understand interest

Give your children an introduction to the power of interest. Starting a savings account may seem more exciting when your child realizes how much money they can earn in interest.

2. Establish goals

Help your teenagers set both long and short term goals that motivates them to build up their savings. The goal of buying a car or putting away money for college will give them something to look forward in the future.

3. Develop a strategy for savings

Help your teens develop a savings plan that works for them. They may want to set aside half the money they get for their birthday or a small percentage of their allowance for something bigger down the road. You might even offer to match whatever amount they save as an extra incentive to start the process now.

Use Credit Wisely

1. Teach the importance of good credit

You’ll definitely want to talk to your teens about why good credit is so important. Help them learn that paying off bills helps people qualify for financing when they’re applying for student loans or want to buy a house.

2. Select the right instrument for you

A number of student credit cards are available now, making it easier to find one that has an adequate level of parental control. Your kids will learn the value of fixed spending accounts by keeping a debit card of their own. As a parent, you’ll have pre-established spending limits on the cards and you can review any of the statements at any time.

3. Pay off your monthly balance

Teenagers will need to learn how interest works against them when they borrow money. Teach them the value of paying off credit card balances each month, which protects them from paying more than the original price for the goods and services they bought.

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These tips offer information and guidance to help your teens master the basics of money management. Encouraging them to be responsible will protect your family’s financial security while you help your teenagers pursue their dreams for college and beyond.

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