Teaching you near adult about saving money tips and money management is not as simple as telling a kid why money is important. You may have to seek an audience with a teenager locked in his or her room, or do a PR job to get his or her attention away from friends, loud music, and other superficial needs. But it can be easier than you’d expect. Teenagers are likely to be more receptive when you talk in terms of their needs. In fact, before you start imparting to them the value of money—and run the risk of nagging more than teaching—understand first where they spend money. The Atlantic has a nice graph that shows teenagers spend money most for clothing and food, and least on, surprise! concerts and events. You can open up the money talk with their needs in mind and hook them in your conversation. To help you out, we culled the Internet and selected what we believe are five excellent pieces of advice.
Invest not spend
This article has a great advice on teaching your teenager the real value of money: it’s not for spending, but for creating more money. Instilling in them the long-term value of investment is one lesson they’ll thank you as they will realize soon salaries are hardly able to create wealth for them. As a parent, you can illustrate the importance of investment by pointing out how your teenager enjoys everyday necessities. For example, how much you’re paying for the house today and its net worth by the time your kid inherits it. A simple math can also help show your kid that investing 10% of his or her income at a 10% return, his or her nest egg can be bigger than the annual salary.
Get them into the habit
The author has a practical style to help teenagers get into the habit of managing money. Teach your teenagers to save 40% of their income (from you or a part-time job), share 10% to charity, and spend the remaining 50%. We like the balanced view presented by the author that half of the income is recommended for spending. Allowing your kids to spend this part at their discretion is much like a reward and incentive that they can get more if they work harder. Money is a function of habit and the share-save-spend formula is a good trait for your teenagers to adapt.
Involve them in daily financial tasks
Have them write the check. We don’t mean they spend it for themselves, but to pay for the house bills. The author makes an interesting point why you should involve your children in simple financial tasks: we are so accustomed to managing money that we forget our kids may not be able to distinguish between savings and checking accounts. The author suggests that by introducing your soon-to-be adults in the daily grind of paying the bills, balancing the check, depositing and withdrawing from banks, they will have a broader view how money works. Perhaps, a better appreciation of how much you are putting in life to earn money for the family.
Teach them the art of budgeting
Good money management starts with a budget. To help your teenagers get off on the right foot, the authors advises to give them a monthly budget. A predictable inflow and outflow of cash will help kids get a sense of budget, that the higher the spending, the lower the treasury is and vice-versa. This strategy is better than handing out bills to them when they need it. Allowing them to forecast the money in their wallet and the period of time needed to buy something also trains them to watch out for spending more than what they earn. The author also suggests that you can give them a budget project like getting the best deal in mobile phones out of a fixed amount. Teenagers have a knack around the Internet. Use this skill to find promo rates or best-value prices for you and them.
Teach them what credit is for
It is inevitable that your near adult will be using a credit card soon. Instead of waiting for him or her to pile up debt, teach him or her how to use credit cards the right way while he or she can’t get one yet. You can cosign the card with your kid and assign a low credit limit, the author suggests. The limited credit is a good start to have your teenager experience the sting of late payments and the high cost of minimum payments, while you maintain control of the debt. We also like the author’s suggestion that instead of a credit card, you can start with a debit card. The objective is to instill discipline in your kid when he or she gets to hold of that plastic card that many college students have incurred huge debts from.
CONCLUSION
The more your kids understand how money works, the more prepared they are in the real world. In fact, don’t talk about money only when it is a problem; encourage the family to talk how to raise more of it and you’ll be raising future entrepreneurs. What they’ll learn from you about money may be more important than their best finance class.
WHAT ADVICE HAVE YOU GIVEN YOUR TEENAGER ABOUT MONEY?
The more your kids understand how money works, the more prepared they are in the real world. In fact, don’t talk about money only when it is a problem; encourage the family to talk how to raise more of it and you’ll be raising future entrepreneurs. What they’ll learn from you about money may be more important than their best finance class.
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I wish someone told me this back when I was young (er)! All I felt then was that my folks were too cheap to buy me the good stuff, and didn't actually explain they were teaching me anything finance-related. Now I have to discover all this on my own.
With so much going on in our economy, now is probably the best time as ever to talk to kids about money. I'm actually teaching my five year old on the value of a quarter (of course, there was a lot of ice cream involved) -- but I do believe this is just the first step to better understanding.
Finance really seems like a topic that is too big for them to be serious about. I doubt they'd sit properly throughout your talk. But the bottom line is that kids will be kids, and they need you to show them what to do. I'm pretty sure you wouldn't want them getting the wrong advice from someone else. This is a very informative article. Keep it up.
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