Giving your teens the tools to manage their finances
Money management is a vital life skill and educating teenagers about money matters will help set them on the path to a secure financial future.
Though education, open discussion, and in-home practice, we can help play a valuable role in establishing good habits that will help teenagers when they are ready to move out of home or into the workforce.
One of the first key elements to focus on is identifying the difference between a ‘need’ and a ‘want’ purchase. When teens are trying to keep up with the latest trends and the social lives of their friends this can be particularly difficult.
Setting up and managing a budget, as well as making the most of available funds, is a necessity in financial education. As an example, helping teens identify why schoolbooks and a laptop for homework take precedence over new clothes or a night out with friends will help develop their ability to prioritise financially.
Most financial institutions offer services to help you set up a budget and professional advice will help break the barrier between yourself and a fiercely independent teen. If you walk your child through the steps of creating a budget and planning ahead, you are helping them with one of the vital skills required for future financial management.
The importance of saving, rather than borrowing, is also an important concept to teach teens, as it will instill financial discipline and a responsible approach to money. This will also help your team avoid debt, interest, and traps associated with credit cards and loans.
It is also worth remembering that as a parent you are not a bank and are not their personal lender. If your child wants to borrow money from you, develop a repayment system or offer to pay half of the purchase and encourage them to save for the other half. This will help teach them skills for when they are financially independent and are looking to purchase large-scale items such as a car or a house.
Finally, help them to set financials goals, whether they are savings goals or debt payment goals. Set your child up with two accounts; a savings account and an everyday spending account. Teach them to put a designated amount into their savings account each week so they are able to see their savings increase and move one step towards purchasing something special.
By educating your teenager on the necessity of financial management and providing them with tools needed to manage their own finances, you are helping to set them up financially for the future and give them the confidence to become financially independent.
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