Teenagers are exposed to so many new learning opportunities that it’s difficult to imagine that one of the most critical aspects of their adult lives (personal finance) is not sufficiently addressed for the majority of children until they graduate from high school.
I find myself, more than three decades after my adolescent years, determining what details I can share with my teenagers. It’s difficult to hold your children’s attention long enough for them to clean their rooms, let alone learn about finances, in today’s high-tech, high-text, supercharged video game period.
After much trial and error, I discovered ten financial tips to teach children and a few innovative ways to capture their attention along the way.
- Banking 101 – As soon as your child is born, open a savings account for him or her and begin preparing a lesson plan for teaching money management. Open a checking account for them during their adolescent years, but do not allow them complete control of the account. Begin by instructing students on the fundamentals of depositing and withdrawing money using checks and deposit slips. Teach them how to reconcile the account, taking into account that the balance shown on the online system can not correspond to their actual balance. When necessary, incorporate a debit card, but exercise extreme caution with this portion of the lesson. It can be extremely expensive if they get carried away with unauthorised ATM / debit transactions.
- Discuss Money Matters – It was once considered taboo to discuss personal finances with your children. It is important that you explore the fundamentals and more in today’s financial environment. Making your children comfortable with the subject begins with your own familiarity with money matters. Begin with fundamental discussions about investing, budgeting, and banking. Utilize real-world examples, such as bank fees that you observe on your bank statement. Share your strategy for reducing or eliminating such fees in the future. You’ll be shocked by how often children participate until they’re included in what was previously considered a “grown-ups-only” debate.
- Basic Budgeting – Begin teaching children basic budgeting skills early and gradually expand the lessons as they mature to the point that they can create their own budget. Simple money management entails keeping track of your expenses and determining where your funds are heading. This is one of the most important lessons you will teach your children. This is a straightforward process that, once established, will prove to be extremely beneficial to them over time. Make certain they understand the importance of “paying themselves first.”
- Needs vs. Wants – This can be difficult because teens believe that anything they want is a necessity. Assist them in identifying the fundamentals of food, shelter, and clothing (not the latest fashion). Although they may be able to obtain an item they want but do not need, ensure they recognise that it must be factored into their budget in order for them to make the purchase.
- Credit Card 101 – Teach your children to use credit responsibly. Assist them in comprehending how purchasing something they want but do not need on credit now can result in the accumulation of excessive debt, creating problems later. Utilize your credit card statement as a teaching method to demonstrate the difference between easy and compound interest. Demonstrate to your teens that approximately 15% of each minimum payment goes toward the principal balance, while the remaining 85% goes toward interest. They need to remember that if they make the minimum monthly payment on a $3000 balance, it will take nearly 40 years to pay off. OMGOSH!
- Credit Scores – The majority of people, mostly teens, have no idea what credit scores are or how to build and maintain good credit. Credit scores are a reflection of your ability to control your credit effectively. The scores are comparable to the grades assigned to students in school. Teach your children how to build and maintain credit relationships, mainly with banks. Encourage them to maintain an A credit rating by paying their bills on time and avoiding excessive credit.
- Invest Immediately – Investing is a skill that can be taught at an early age. Teach your teens that individuals own a variety of businesses, including Walmart, Xerox, and local cable stations. They can also acquire stock in these businesses. As a homework assignment, delegate them to conduct research on various companies or sectors of interest. Encourage them to research various investment options such as mutual funds, stocks, and bonds that can allow them to acquire ownership in some of their preferred industries or companies. Make monthly deposits that should pay off handsomely by the time they hit the age of 30.
- Safeguarding and Protecting Valuables – Teach your youth that their identity is just as important as the things or cash that they are attempting to safeguard and secure. They will now be able to submit applications or fill out forms that include their social security number. Emphasize the value of not sharing their social security number, account number, or other form of personal identification with others. Occasionally, children believe that sharing this knowledge with their best friend is appropriate. Justify your position by stating that this is not negotiable. They are aware that identity fraud is prevalent in today’s culture and are averse to being a victim.
- Keep It Exciting – To keep the lessons interesting, consider using games like Monopoly, which teaches students about the benefits of land ownership and demonstrates how their assets will begin to function for them. While you’re at it, show your teens how to change money without using a cash register or calculator.
Allowance; Pay Your Own Way – Have you ever noticed how quickly children can waste your money? Charge your children with the burden of paying for their own expenses and watch your spending decrease. Enable them to receive an allowance and hold them accountable for a monthly expense such as their mobile phone or weekly lunch money. Assure that they understand their role by enforcing the budgeting process. You’ll be amazed at how their spending habits shift once the money leaves their wallet.
We all want the best for our children as adults. As parents, one of our primary responsibilities is to ensure that they are prepared for life. I intend to spend as much time as possible with my teenagers. The exercises above allow me to spend some of that quality time imparting a life lesson.