Effective money management is one of the most important skills a teen needs to learn in order to succeed on their own. However, teaching your teens how and why to save their money can be a daunting task.
Most teens enjoy instant gratification – if they see it, they buy it. This is because growing up, they never really had to save for anything. But the days of college tuition, rent and car payments are quickly approaching and it’s essential to teach your kids about managing their money now rather than later.
Whether your teen has a part-time job or is living off of a monthly allowance, they need to understand the concept of budgeting and saving. Here are some tips to help them achieve this.
Start a Savings Account
If your teen has enough money to start a checking account, they should have a savings account as well. Have them put 5% to 10% of their paycheck or allowance into their savings account each month. Do not let them take that money out, no matter how much they may beg. Be sure to explain why it’s important to put this money aside. Explain how interest works. It’s also important for teens to understand what exactly they’re saving their money for. Whether it’s a car, college tuition, rent or a general safety net later in life, if they know why they’re saving, they’ll be happier to do it.
Reward Them for Saving
Reward your teen for achieving their goals. First, have them establish a savings goal for each month, and if they reach it, reward them with a little extra money or a small gift. Everybody loves to be recognized for their accomplishments, so be sure to let them know you are proud of them for being responsible with their money.Explain Credit to Them
This one is super important. Too many people splurge on their credit cards and don’t have the money to pay the bill later. Be sure your teen understands the difference between debit and credit. They must understand a credit card is not free money; it’s borrowed and they must be able to pay it back. Be sure to teach them about credit scores and how they affect your future. Teens need to know the difference between a high credit score and a low credit score, and not paying credit card bills can result in a low score. To help them fully understand how credit cards work, show them your credit card bill at the end of each month.
Teach Them How to Manage on a Limited Budget
To help your teen budget, figure out how much money you spend on them each month for their clothes, entertainment and other personal items. Then, give that money to them at the beginning of each month, but do not bail them out if they spend it too quickly. This will help teach them self-control and help them understand money is finite and can run out quickly.
How have you taught your teens to manage money? Share your ideas here!
Categories:
Money Smart Kids
, Smart Spending
, Strategies for Saving
