Rearing Budget Savvy Teens
In today’s economy, raising teens that understand the basics of money and have a solid foundation in money management is important. Being well-versed in how money works at an early age can set them up for a promising financial future. Here are a few ways to get started:
Show them your paycheck stub, explaining the process of how it’s calculated, what deductions are taken and why. Implement an allowance system tied to their chores, giving them federal deductions. This will help them understand that nothing is free, and Uncle Sam is right there waiting for his cut.
Sit down with your teens, showing them how to create a budget. Explain recurring bills, the importance of keeping track of what comes in and goes out, and the consequences of not paying your bills. Creating a tentative budget for when they go off to college will also help put some things into perspective, so they can see how important it is to live within your means.
Saving and Spending
Open a savings account for them and have them contribute a little from their allowance, letting them see firsthand how a little can add up over time. Next, give them an opportunity to purchase something with their own money to see how quickly their funds can disappear. Another good incentive is to take the deductions from their allowance and put it into their savings account to see and understand how interest compounds.
Help your kids understand how borrowing works and the importance of maintaining good credit. Explain how interest compounds and the differences between paying cash, paying with credit and the danger of credit cards.
Purchase a stock or two for your teen and teach them how to watch the stock market. A conversation on retirement accounts and putting money away for the future is smart.
Don’t forget the basics – how to fill out a check, use a debit card, shop with a list and spot a good sale. With these tips, your teens will be fully equipped for a great fiscal future!