Teenagers tend to think that they know everything already, and often consider their parents to be clueless about what really matters to them. Such erroneous beliefs are not true, since parents are well aware of the dangers of poor financial decisions. Parents can and should teach their teenagers quite a bit about money and how to use it well.
Since parents have had more experience on how to deal with financial thicks and thins than their children, teenagers can learn a lot from the advice they give. The knowledge parents share with their teenage children will help them get on the right path financially and set them up for benefiting from having good credit. Here’s how to do it:
1. Start a savings account. When your teenager receives money from their first lawnmowing or babysitting job, take them to the bank. Saving money is an important part of managing money. Ask them to give their money a month to sit in the account before they spend any of it. This will be hard, but one job may pay forty dollars that will be gone in a weekend. After a month, their savings account may have $200 in it. That can buy a new outfit and leave some money for a rainy day.
2. Get a certificate of deposit. After a teenager has successfully saved about $500, have them invest this money in a CD. Interest rates will be higher on CD’s the longer they are kept. Testing this out on a one year CD is a good idea so that, when the CD is opened, your teenager can think about what they should do with the money that has accumulated.
3. Sleep on it. When your teenager sees something that they really want to purchase, ask them to sleep on it for a night or two. Parents know all too well about buyer’s remorse after an emotional purchase. Implementing the “sleep on it” rule of thumb in your household can save your teenager from feeling that same remorse. They want a scooter today, but by taking the time to think about the purchase, they may choose to save to buy a motorbike instead.
4. Plan your finances. Making a budget can be just as helpful to teenagers as it is for their parents. Explain the difference between wants and needs and then let them consider their situation. Over a period of time, allow teenagers to write out just what they consider to be their personal wants and needs.
5. Determine how much money and time it will take for teenagers to afford their wants. They can also decide what amount of money they want to save on a monthly basis in an effort to buy something they want. This way they will have some extra spending money for going out with friends or on dates.
Raising a teenager that understands money is not impossible. Starting when they are young children lays the ground work for future teachings. Teenagers that can take control of their money become adults that won’t want for it.