Smart Money Basics for Teens
When it comes to teaching smart money basics to children, teenagers may be the most difficult to reach. As they get older and become more independent, teens may already have a long list of ways they want to spend their money. They may also face strong peer pressure to always have the newest and best of everything, so saving may not come naturally.
Teaching your teen the best ways to handle their money is crucial for ensuring their future financial success. Regardless of your child's age, setting a positive example is the most effective way to educate them, especially when considering saving and spending habits. Teens are ready to be part of the money conversation, whether they admit it or not, and your relationship with money is the clearest way to communicate those lessons.
If you're interested in expanding your teen's financial base, here are some specific that may help you focus your discussions:
Up Your Expectations for Allowances
Establish certain expectations for your teenage children who earn allowances. Make them responsible for paying some of their day-to-day living expenses, like purchasing gifts for friends and family, clothing outside of the basics and gas for their cars. Keep in mind that this is one of the best ways to teach budgeting, so resist giving out advances or loans when their money runs out. A few missed outings will go a long way in helping your teens organize their spending habits.
Show Them How to Balance a Checkbook
This is an incredibly important skill, even with the convenience of online checking available with most accounts. If your teen doesn't already have a bank account, show him or her how to open one. This is especially important if your child is already earning an income outside of the house.
Match Their Savings Contributions
Consider this as a way of introducing your child to the concept of a 401(k) savings plan. This technique is especially effective if your teen has an expensive purchase in mind. By reaching a relatively short-term buying goal, your child will learn the value of a dedicated savings strategy.
Involve Teens in Family Financial Discussions
While you don't want to burden your teens with too much financial pressure, helping them understand the day-to-day expenses of a functioning household is important. When they understand the reality of what you spend, they may be more willing to contribute to the budget instead of demanding more.
Discussing the cost of college is a great place to start. You may even want to involve your children in a savings plan for a portion of their future tuition expenses. The more familiar they are with the cost, the more likely they'll be to take the investment seriously.
Suggest Direct Deposit
If your teenage children have jobs outside of the household, encourage them to have their paychecks deposited directly into their checking accounts. Even better, you may want to suggest that they devote a portion of their earnings to a savings account as well. Because this is the preferred payment strategy for many employers, exposing your children to this type of money management will help them be more comfortable with it in the future.
As your teenagers get older, you may want to help them develop more advanced financial strategies. To learn how to prepare your children as they get ready for college, visit our Smart Money Basics for College Students page.