In today’s modern world, being financially savvy is crucial. Between the changing global economy, the rising costs of higher education, and the introduction of digital currencies, it’s more important than ever to start teaching your teens financial skills early on. Here are some great tips on how you can help your teens prepare themselves for the world of money-management!
Have them open a bank account. There’s no better way to teach a teen about saving (and spending!) their own money than by having them open a personal checking account. By receiving access to a debit card, your teen will be able to make purchases using their own savings. However, because a debit card is only linked to the available funds in their account, there’s no risk of falling into debt (like with a credit card). In addition, most banks have options for young account holders to sign up as a “joint” account under their parents. This way, the teen will still have their own funds, but parents can monitor and access their account. With the large consumer switch to online retailers and internet purchases, cash alone just doesn’t cut it anymore. Your teens will appreciate having their own money they can spend, and more importantly, the responsibility that comes with it.
Let them make mistakes. Although this may sound counterintuitive, it is better for teens to learn what bad or impulsive spending habits are now than later. Consider this – your teen decides to spend all $100 in their bank account on two new video games. They have the games, but they also now have no money left in their account for the rest of the month. This is a great way to introduce budgeting, and more importantly, financial responsibility. It is better for your teen to make a mistake now and spend “too much allowance” than later in life when real money is at stake!
Encourage them to save up for a purchase. Larger and more expensive purchases often require a bit of saving! By encouraging your teen to save a little each month, they will learn the value of long-term financial responsibility. In today’s world of instant gratification, your teens will appreciate the feeling of having earned something they worked towards.
Involve them in real-world financial decisions. Having your teen engaged in the process of smart-shopping is integral. Many teens, for example, get their learner’s permit or driver’s license around this age. They’re going to need car insurance, and there’s plenty of plans, discounts, and companies out there. Get your teen involved in the decision-making process to give them an introduction to these modern necessities (health insurance, car insurance, etc.)
Plan their college finances together. On a related note to our last point, college is a huge real-world financial decision. At Tutor Doctor, we encourage all of our students to pursue higher education, and it’s important for your teen to be aware of the costs. By reviewing tuition costs, room and board fees, textbook expenses, etc., you are helping your teen to understand the reality of what it costs to attend college. In addition, the large number of financial aid, grant, and scholarship programs are another great way to get your teen involved in the process. By filling out these applications together, you can help them to understand the true value of these programs.