As a parent, you want to provide life lessons to your children that fit each stage of their development. Teaching children about money is particularly crucial at this time because few schools offer stand-alone courses in financial education. Teens, in particular, need to develop skills centered around managing money and planning for their financial futures. Teach teenagers these lessons and they can reap rewards and stand independent at any age.
Avoid Legal Trouble
Most financial instruction will revolve around the practical considerations of growing money. However, start by providing a lesson in an area that encompasses more than finances, but in which a person’s bank account can take a hit if not followed: poor decision-making. Theft, drunk driving or other lawbreaking activities can not only have serious moral complications but can bring huge legal fees and criminal costs. For example, an arrest may require putting money down at bail bonds West Chester PA just to secure release from jail initially.
Start a Budget
Next, start with the most basic financial practice, budgeting. While the concept can seem abstract to teens, knowing where money goes can make it easy to regulate how much to spend. Use a spreadsheet to itemize anticipated and recurring costs. Show how the total should be less than a paycheck or monthly allowance so that the balance never goes into the negative. If your child desires something discretionary, that can be put on hold until the following month if necessary.
One line item on teens’ spreadsheets should focus on paying themselves, no matter where else they must direct money. Those self payments should go into savings so teens have emergency funds at their disposal; they will also learn to value themselves as much as the stores from which they may be making purchases.
Open the World of Investing
One form of savings a young adult needs to establish is any form of long-term investment. By starting early, not only does an investor accrue rewards from compounded interest, but the child can begin to understand the world of complicated and ever-changing financial markets; mutual funds are ideal starting points as a result of their low fees and diversified offerings. If your teen has a job, educate about and help open a retirement account that can be held safely for decades.
You will find many financial teachable moments as your teenager faces new situations. Some are simple, such as how to pay for public transportation; others are significant, including job-interview basics. By setting a financial foundation of learning, you may find your child open to these ongoing tutorials as they occur.