How to help your teens become money smart
Being good at managing your money doesn’t have to be something that you are born with. Often, parents assume that math and money is not their kids’ priority. In our opinion, that is a dangerous assumption to have, and it can be damaging to the kids’ future too.
Kids are like an empty canvas
It is the responsibility of the parents to enable the kids to manage finances properly.
Education about money matters starts at a very young age. However, the teenage years are the period where parents can enter into details as around this time, kids start thinking about financial independence. They take up part-time jobs and start saving up. It is crucial to guide them at the right time to prevent them from making hasty decisions.
The following includes some principles that should be taught to teenagers for better money management:
Importance of financial independence
When the kids are too young to look after themselves financially, parents handle this aspect as they should. However, small lessons with regards to excessive spending and savings can be taught early on, like giving the kids pocket money only after they have completed small chores around the house.
Getting a part-time job during the teenage years also has many benefits. It teaches multi-tasking, looks good on a college application, and teaches financial independence, and since they will know how hard it is to earn money, they will be inclined to save instead of spending.
Nothing comes free
Teenagers are intuitive when it comes to having their demands met and successfully manipulate parents into fulfilling their every need. Parents’ first instinct is to protect their kids from any harm or hurt. This is precisely the correct time to practice tough love and hold out.
Motivate the kids to get a job if they need money to buy something. Do not hand them things on a silver platter; it will just make them entitled and bratty. You might be solving their problems in the short-term, but you are setting them up for long-term failures.
Once they start earning, start charging them little amounts. It will help cultivate a habit of managing money for mortgages or any fixed payments. It may sound cruel to parents but refrain from giving your kids a free pass.
Often in life, we don’t always get the reward immediately or the way we were hoping to get despite our best efforts. There is no other option but to wait and keep working harder, no matter how frustrating it gets.
The lesson needs to be taught to teenagers. What if they want to buy something big? Encourage them to set a portion of money aside each week or month to build the funds slowly.
The sense of accomplishment and the sheer joy of owning something that you have worked hard for cannot be described in words. The journey may be hard, but kids need to experience it early on in life.
Also, resist the urge to chip in. While you may bring them closer to buying their dream “thing”, in the long term, you are taking them farther away to deal with difficulties they may encounter.
Borrowing should not be the first choice
The world has evolved, so has the attitude towards credit. While accessing a
loan is comparatively easier and has proved to be helpful to some people, it also opens up the possibility of falling into a debt trap if one is not careful.
While waving a credit card in a retail store is considered a style statement, teenagers should know the dangers of credit card debt.
The difference between good debt and bad debt should be explained properly. For example, debt taken to finance an asset that appreciates as time goes on is good debt. A bad debt starts accumulating and multiplying at an alarming rate.
School your teen on limited spending and make them understand a basic fact, credit card spending should be well within the limits of their earnings. The consequences of credit card debt should also be highlighted.
Every action has consequences
Almost every teen has a rebellion phase, thinking that they know better. Despite your best efforts, children stray off-limits. If they do land in hot water, hold them responsible for consequences. Ensure that they take an active part in cleaning the mess that they have created.
It is imminent that the kids realise that the parents do not have a magic wand that can be waved to fix every problem. Teenagers should not run to their parents at the first sign of trouble. They should be held accountable for their actions. They may need to work extra hard to pay back an impulse purchase, but this is exactly what will hold them off when they want to make an impulse decision.
We know that things are easier said than done. Still, if you stick to these tips, you will be raising a responsible and independent citizen, which will probably not end joining the hordes of citizens suffering in debt.
The citizens you create now will raise the citizens of the future, and your children may hate you now, but in the future, they will thank you.
Why was my loan application rejected?
What is loan refinancing and why you should care
What is financial responsibility and how to achieve it