With over 60% of Americans lacking significant savings, we need to do better financially. And ensuring our kids don't follow in the majority's footsteps of floundering seems to be the best place to start. Now is the time to help your teen learn about money.
At this time, most teenagers are more likely to land on get their first job, get weekly allowances or begin earning some money. That means they can access financial products such as loans. So, the decisions they make at this stage, and what they learn about money, will have a huge impact on their finances in the future.
Therefore, it is important for them to develop a habit of saving and spending money wisely. Studies show that kids who learn to save money early tend to be more independent and responsible financially in their entire lifetime.
So if you're looking for ways to help your teen learn about money, here are five lessons to pass on.
Setting Financial Goals to Learn About Money
One of the first steps in helping your teens learn about money is to simply set goals. Teenagers are known to blow money on products that are discarded after a short time. This is because most of them lack self-control or affected by peer-pressure when buying items.
Teaching your kid to have set financial goals will help him/her learn to save money for items they really need. And since most teens know what they want, you can break them into manageable goals.
For example, if your teen wants to buy a $400 video game and gets an allowance of $50 a week, help him/her understand how long it will take to hit that goal based on their rate of saving.
Budgeting is another important step in the process of teaching your teen to learn about money. Fair Advisors report that about 55% of American parents worry their teens fail to budget or stick to one. So now that you've helped your teen set financial goals, it is important for them to budget.
Learning to budget can help your teen manage their spending. It can also push him/her to find ways to earn more money to meet their expenses.
So let your child list all their income and expenditures. Explain to him/her the importance of budgeting, how it works and why they should stick to one. That way, your kid will not be tempted to live beyond their means by taking unnecessary debt.
People tend to buy more expensive items or items they didn't plan for if other shoppers are nearby. It usually results in overspending, which most people don't realize.
It is therefore critical to inform your child that they may be better off shopping alone sometimes. Alternatively, advise them to choose the right shopping partners.
Shopping wisely also means not allowing the store to seduce, being careful with freebies and being careful online.
Teens will learn about money effectively if they learn to track their spending. Being smart financially means knowing where your money is going and being happy with those decisions. Encouraging your teen to keep receipts gives them the opportunity to track their money and reflect on their expenses.
That way, they will physically feel how they spend money and account for their decisions later.
Benefits Of Saving
If you want your teen to learn about money, make sure you teach them about saving. The main goal of spending wisely is to save. But if you don't show your teen the benefits of saving they may not get the big picture.
So if you're a good saver, share your experiences to help them see real-life benefits. For example, show him/her how much you've saved for emergency funds, retirement and how you've been able to stay out of debt.
Also, don't be afraid to share the bad decisions you made in the past. For instance, if you have bad debts, share them with your teen and explain how it has affected your life. It will caution them when making any financial decisions.
Talking with your teen about earning, saving and spending money wisely can help them become financially responsible in the future. With these lessons, you can ignite good habits at the right time and help them avoid costly financial mistakes.