18 December 2017

Tips for Teaching Your Teens About Money Management

Tips for Teaching Your Teens About Money Management

As your kids grow into teenagers, they go through many changes. They outgrow toys, their clothes, and their tastes change in a way that might put quite a strain on your household budget. However, before you start handing out cash to your teens or help them get their first after-school job, there are a few money management lessons you can teach them that might give them an edge once they step out into the adult world and handle their own finances.

Teach Your Teens About Credit

Many older teens often find themselves in over their heads when they first start to open lines of credit. The temptation to open department store and specialty cards is usually difficult for them to resist, especially when it comes to buying trendy clothing and electronics. Teaching your teens about responsible credit spending before they get a card can help them use one responsibly later.

One of the most important lessons you can teach your teens about credit is how to choose a card with a competitive annual percentage rate. Encourage them to shop around and compare different APRs, and point out how specialty and individual store cards usually have a high rate, usually anywhere from 25 percent or higher. Explain to them that while these cards can be tempting to own, they might end up costing them a fortune in interest payments. When your teens understand how credit cards work, they might be less likely to abuse them once they open their own accounts.

Share Your Own Life Experiences

The concept of saving money and budgeting are usually abstract concepts for most teens. They know mom and dad work and pay bills, but the actual cost of groceries, utilities, car payments, and other expenses is less of a reality to them than it is for you as the adult. However, sharing examples from your own life can help teens conceptualize what it means to spend.

For example, if you are planning to refinance your vehicle, you can use it as a teaching tool for your teens. Include them in the experience and show them how your credit report, credit score, and credit payment history might affect your chances of being approved. If you do get approved, show them how that lower payment might have a positive effect on the family budget.

Start Them Off with a Pre-Loaded Debit Card

If your teens have a part-time job or you give them an allowance each week, you may want to get them a pre-loaded debit card. These cards usually do not require a checking account, and you can add money to them at any time. Consider these cards as financial training wheels; your teens will be able to spend money but will have to make choices about what to spend it on, just as you do. If they do well and learn to budget responsibly, you can help them open a checking account so they can obtain a real debit card.

School Them on the Cost of Vehicle Ownership

One of the most exciting moments in a teenager’s life is when he or she earns their driver’s license, but financial caveats come with this newfound freedom, and your teenagers should learn about them. If they plan to drive your car or if you find them a used car to drive to school or their part-time job, tote up the average weekly cost of gas, maintenance fees, and monthly insurance premiums and discuss them with your teens, especially if you expect them to chip in for these expenses.

Teaching your teens about how to handle finances can give them a head start as they venture out into adulthood. The more they understand about how to create a budget, handle credit responsibly, and understand the real value of what they purchase, the better prepared they can be when the time comes to leave the nest.

No comments:

Post a Comment