Whether your teen has a part-time job or is living off of a monthly allowance, we’ve compiled a few tips to help them understand the concepts of budgeting and saving:
Start a Savings Account
If your teen has enough money to start a checking account, they should consider opening a savings account, as well. Have them put 5% to 10% of their paycheck or allowance into their savings account each month, and do not let them take it out. Be sure to explain why it’s important to put this money aside. Explain how interest works. It’s also important for teens to understand why exactly they are saving their money. Whether it’s a car, college tuition, rent or a general safety net later in life, if they know why they’re saving, they’ll be happier to do it.
Reward Them for Saving
Reward your teen for achieving their goals. First, have them establish a savings goal for each month, and if they reach it, reward them with a little extra money or a small gift. Everybody loves to be recognized for their accomplishments, so be sure to let them know you are proud of them for being responsible with their money.
Explain Credit to Them
This one is super important. Too many people splurge on their credit cards and don’t have the money to pay the bill later. Be sure your teen understands the difference between debit and credit. They must understand a credit card is not free money; it’s borrowed and they must be able to pay it back. Be sure to teach them about credit scores and how they impact future purchases. To help them fully understand how credit cards work, show them your credit card bill at the end of each month.
Teach Them How to Manage on a Limited Budget
To help your teen budget, figure out how much money you spend on them each month for their clothes, entertainment and other personal items. Then, give that money to them at the beginning of each month, but do not bail them out if they spend it too quickly. This will help teach them self-control and help them understand money is finite and can run out quickly.
The earlier you begin teaching and talking with your teens about healthy money habits, the better prepared they will be for their future.
How have you taught your teens to manage money? Share your ideas here!
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