Your kids grow up fast (too fast!) and the next thing you know, they are asking for money to buy a new pair of shoes or negotiating a raise on their allowance. Teaching your teen about money is an invaluable lesson that will prepare them to survive in the real world without you holding their hand or monitoring their spending habits. Here are some tips to help you guide your teen on a path to healthy money management habits.
It will be easier for your teen to quickly pick up money management if it’s not an entirely new concept. From an early age, you can practice patience and counting, discuss and implement an allowance, or talk about prices of household items that are used on a daily basis. There’s a way to bring up money management at every age, even if it’s starting with the basics.
Curb impulse buying
Some adults still have a hard time resisting the impulse to purchase something the moment that they fall in love with it so it makes sense why teens also struggle with it. Teach your teen to plan purchases, clip coupons, compare prices, and look online for the best deal. Show them that immediate gratification isn’t always the best bet. In fact, it feels better when you’ve worked hard for something.
Make a wish list
Encourage your teen to make a wish list of items that they want (not need) so that they can plan to purchase them at a later date. If they see something that they want to buy, have them take a photo of the item and the price tag with their phone. This is a good way to store items that they’re interested in and they might go back and peruse through the photos and be glad they didn’t buy something on the spot.
Make a budget
Discuss with your teen what they spend their money on and help formulate a plan. Don’t make it for them but let them give input and help them design a strategy that they think is doable. Try to find a good balance between realistic and reaching for the stars. Remind your teen that they can adjust their own budget as they go along, as it is their budget. Once your teen understands what’s coming in and going out, they can easily prioritize for the things they want.
Keep track of expenses
It’s not enough to make a budget and attempt to stick to it. Help your teen keep track of where their money is going each month with a notebook or computer. When they don’t follow their plan, this will help them reflect on how they spend their money and where adjustments can be made. It can be eye opening to see that half of their money is going to eating out with their friends after school!
Set goals for savings
Teach them about short-term and long-term savings goals. Help them to understand that if they want it, they have to pay for it. Goal setting takes patience and vision, which doesn’t come easy for all teens; in fact, it might take some of your patience while helping them navigate their plan. Help them calculate how much they should put aside each month to reach their goals and how long it will take.
Give out limited freedoms
Find ways that your teen can practice financial freedom. Instead of handing over your credit card and hoping that your teen doesn’t rack up a tab, utilize apps and websites such as Amazon that have programs tailored to teens. Amazon has an account option for families where they can create independent logins for their kids (with your credit card) so that they can shop and purchase items by themselves. Don’t worry, as a parent, you still have to approve purchases before you get charged, so you ultimately have the final say. Although opinions vary, some say it’s a beneficial experience for a teen to have a co-signed credit card with a low spending limit. Start with small freedoms and when your teen shows great strides when it comes to financial responsibility, give them a little more freedom.
Recommend a book
Sometimes it’s hard to hear things from a parent and it’s much easier if advice is heard from someone (or somewhere) else. There is an abundance of literature out there about money and savings but try and look for books that are tailored to your teen such as What All Kids Should Know About Saving and Investing by Rob Pivnick, Loaded: Money, Psychology, and How to Get Ahead Without Leaving Your Values Behind by Sarah Newcomb, Not Your Parents’ Money Book by Jean Chatzky or The Money Savvy Student by Adam Carroll.
Once your teen understands the sense of accountability that finances require, this responsibility might spill over into other parts of their lives, such as getting good grades or avoiding trouble. Set your teen up as early as possible for success in finance management. You’re not only a parent, but you’re a teacher, and the lessons that you instill in your teen about money will help prepare a solid foundation for their future.