If your teenager can manage their own money, they will have a higher standard of living and won’t have to call you for cash, which will give them a greater sense of financial independence while easing the burden on your salary. They’ll also have the freedom to choose their path without worrying about excessive student loans, car payments, or credit card debt.
Your teen is becoming more independent, but still needs plenty of advice from you. With more money to spend and more opportunities to spend it, your teen can easily get into financial trouble. So before money burns a hole in your child’s pocket, teach him or her a few financial lessons. With your help, your teen will soon develop the self-confidence and skills he or she needs to successfully manage money in the real world.
1. Set Goals
The next time your child asks you to buy something that is out of the norm such a video game or a concert ask your kid to come up with a plan to save up for it. Work up the cost and build a plan on how you can save for it and whether it is even within the range of your saving ability. In fact, even adults aren’t always connecting financial decisions to goals. The clearer you are on the goals, it makes it so much easier to make the right decisions.
2. Give them Responsibility
When it comes to money, allow your teens some discretion and independence. This gives them the space they need to learn how to be responsible and accountable.
Pocket money – Giving your teen pocket money could help them learn about making smart saving and spending decisions. Making pocket money conditional on completing household chores is a great way of doing this.
Bank account – Helping your teen set up bank accounts and savings accounts could help them learn about tracking savings, earning interest, and reading bank statements.
Purchases – Don’t give your teen everything he or she asks for. Instead, expect them to save up for certain wants. If your teen wants a new gaming console, sneakers, or bike, help them set savings goals and encourage them to work towards buying the item themselves.
3. Developing a Budget
You can work with your kids on making a plan for spending an allowance or earnings from a part-time job. Once they’re 13 or 14, they may be thinking about buying a car or making another big purchase in the next few years. That takes a lot of effort and planning.
Developing a written spending plan or budget can help your teen learn to be accountable for his or her finances. Your ultimate goal is to teach your teen how to achieve a balance between money coming in and money going out. To develop a spending plan, have your teen start by listing out all sources of regular. Next, have your teen brainstorm a list of regular expenses. Finally, subtract your teen’s expenses from his or her income. If the result shows that your teen won’t have enough income to meet his or her expenses, you’ll need to help your teen come up with a plan for making up the shortfall.
4. Introduce Investing
Investing smaller sums with limited consequences is a great way for kids to learn about managing risk. They don’t even have to use real money; online fantasy investing games make it easy to develop and practice important skills, and competition with classmates or family members may increase their interest.
5. Saving for the Future
As a youngster, your child saved up for a short-term goal such as buying a favorite toy. But now that your child is a teen, he or she is ready to focus on saving for larger goals such as a new computer or a car and longer-term goals such as college.
Now is a good time to talk about the growing cost of higher education. Let your children know how much of the expense you’ll be able to cover and whether they’ll need to contribute through savings or work. If you’ve established a college savings plan, discuss how it works.
6. Understand Needs vs. Wants
Now that your children have their own spending money, they’ll have to learn the difference between something they need and something they want.
They’ll also have to gain the ability to delay a purchase. If you want what you want and want it right now, you won’t have the time to do your due diligence on the item you desire. Have them conduct research of the item they want to buy which will also teach them to spend wisely. Show them online reviews and help them differentiate between paid advertising, influencers and unbiased reviews.
7. Focus on Financial Freedom
Remind your teen children about the bigger picture: the positives of achieving financial freedom. While it’s important for them to learn about the risks of abusing credit and overspending, help them understand that the discipline of financial responsibility comes with the reward of achieving personal goals. These could be a new car, holidays and travel, or other wants. If they see money as a useful tool they could be more likely to have a positive relationship with it.