High schools are not doing a great job educating teens about money. The responsibility then falls on you. Do it right and you would be able to set your child for a lifetime of financial success. Here are some tips that will show you how.
- Begin from the beginning.
Run the basics of finance with your teen. For example, explain the difference between actual and expected expenses, short-term and long-term expenses, and the importance of setting financial goals. They should also understand the importance of delayed gratification, prioritizing expenses based on value and necessity, and learn taxes.
If they do not have one already, open a bank account for your child and help them master the skills required to keep track of it. If your teen is showing promise, consider opening a low-limit credit card for them and help them to use it responsibly. Make sure they pay off the balance in full each month! Not only are you passing important money skills, you are also helping them to build good credit very early in life.
- Have family money discussions.
Instead of talking money with your spouse only, get the teens involved. Of course, you should not expect them to understand everything right away but they can sure learn from you as you discuss investments, balance your checkbooks, and make decisions to advance your stocks portfolio. You can also let them participate in your monthly budget meetings so they can get an idea of how income is divided to meet expenses. The sooner they learn that money has to be earned, the better for their skills.
- Let them manage their own money.
Whether it is an allowance or income from a part-time job, let your teen manage his or her own cashflow. It is a good opportunity to teach them how to budget. You can show them how to create categories and allocate an amount for each. Once the money is spent, there is no more for that category. Letting them see this for real will teach them how to stick to a budget and have realistic monthly goals.