Many children can understand simple financial concepts as early as five, which can be a good time to teach them about the value of dollars and cents, as well as needs versus wants. However, once they become teenagers and are old enough for a job with regular income, showing them how to make a budget is a key step in preparing for the real world. After all, this isn't a subject taught in school, so how else will they learn basic financial skills?
As a money mentor to your teenager, you should share examples from your own life. Sharing that you paid off a credit card or over spent on your budget will let them know, no one's perfect and they can do better next time. To help ensure your teens become aware of what's ahead, we've listed a few ways you can promote financial education to them.
- Find out what your teenager spends their money on and work out a plan with them. Let them give mature input and make sure they know this budget is theirs and they set their own priorities.
12 Months To Financial Fitness: Building a Budget
- Long-term Savings Goals
At this age, their own car is probably the first thing on their minds. If they want a car, they can pay for it. Teach them what they should save each month, and for how long, before they have enough to pay for one. Early exposure to goal setting helps to give them patience and a vision, two things they’ll need in life.
Short-Term vs. Long-Term Savings Goals
It's important that teens understand the consequences they may face if they don’t keep their finances in good shape. Make sure that you discuss the impact missed payments and large amounts of debt can have on a credit score.
A teenager with a credit card can seem scary, but teaching the ins and outs of interest rates, payment periods and amounts, will prepare them. Let them know the risk of credit card debt, and how credit card debt and interest expense can quickly accumulate.
Don’t worry too much about things you don’t know. If you don’t feel confident about money matters, you're not alone - most people don’t and that’s okay. Every day, you excel at something your children need to learn, whether it’s managing your time between work and home, saving money when you shop, or planning for something in the future. At the end of the day, it’s up to the parents to teach financial education and help prepare kids for the future so they have the best chance of success.
Sources and helpful information for savings advice:
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