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Teaching teenagers to be financially savvy

Ever wonder how or even what you should be teaching your teenager to help make them more financially prepared?  The teenage years can be a difficult time to impart financial wisdom. They have little income and very little if any financial responsibility. If one is not careful, it is very easy to create bad financial habits during these formative years.
 
What are the basic financial principles that teens should understand?
First is having them understand a need (groceries, gas for the car) versus wants (latest video gaming system, newest smart phone).  The next concept is saving for bigger ticket items instead of buying now and paying you back. The third is about having a plan for where their income is going to go or a budget. Teens and young adults who understand and can live these three basic tenets are much better prepared to have a sound financial future.
 
What are ways parents can help reinforce these concepts?
One good way is to give them more responsibility for expenses that they have such as gas for the car, eating out, clothes, etc.  Help fund these new expenses by providing an allowance for them on a monthly or semi-monthly basis and don’t extend them credit if they have unexpected expenses. This teaches all of the above concepts in a real world setting. And it also helps them understand that things happen that we don’t see coming and we need to be financially prepared for the unexpected.
 
What financial tools should teens be given?
Start with the basics – savings account, checking account, debit card and online or mobile access. Show them how to use various financial tools like online budgets, calculators for saving and comparison shopping websites so they can start thinking about how to save on the items they need to buy.  A teen armed with these tools can really start to develop solid financial habits.  Once they are eighteen, a credit card can be added to the mix to start teaching responsible use of credit.
 
Is there anything else that parents should start sharing with teenagers?
It is a really good idea to start talking about family finances with them. Let them see how much it costs for groceries each month, electric or gas costs to heat the home, and other monthly expenses. Talk about all the expenses with a car such as insurance, maintenance and gas.  This glimpse into the family finances will ensure they are not surprised when they start living on their own.


Posted: 5/12/2014 with 1 comments

Categories: Kids and Money, Money Matters



Comments
Susan
I think it is a good idea around age 16 to set your kids up with a debit card from Forum with a parent authorized on the account. This way you can see what they are spending and where. This allowed by teen to have the ability to pay for small things without me giving her cash that can be misplaced or stolen. It also taught her how to manage money and gave me the convenience of being able to monitor things. I love the instant funding from other Forum accounts. SO convenient!
6/16/2014 at 1:57 PM

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