As soon as your teenager receives their first paycheck, drives for the first time or goes off to college or university to claim independence, they must begin making key financial decisions. One way of equipping them is teaching them the value of good personal finance: tracking expenses, creating a budget and saving in addition to paying bills such as insurance or credit card bills. Also important are understanding needs versus wants as well as avoiding debt and creating an emergency fund.
One of the most crucial money lessons you can teach your teen is budget management. A budgeting app can help them set up multiple accounts to monitor spending and income, helping them avoid mistakes that result in high interest rates, such as missing payments or carrying large balances. Furthermore, this helps them understand how their choices impact their credit score – something which will be necessary when renting or financing an apartment or cell phone contract in future.
Teaching teens how to distinguish between what they need and want can be difficult; but it is vital for their long-term financial wellbeing. For instance, buying a new car if the old one works fine may not be necessary. Instead, encourage your teen to build an emergency fund, which will allow them to cope with unexpected events without incurring debt.
As your teenager becomes an adult, they’ll become eligible for loans to purchase larger items, like cars or houses. It is crucial that they understand all costs associated with these purchases as well as any implications on their credit rating or repayment period; additionally it would be prudent to encourage savings accounts or mutual fund investing to prepare them for this responsibility in future.
Teenagers will make mistakes with money, which is perfectly normal. Instead of bailing them out each time, try teaching from their mistakes and leading them in the right direction.
Teaching personal finance to teens is made simpler when they use examples that resonate with them and earn their own money, whether through an allowance or helping out around the house. This will teach them the difference between earning and being given money and reaping rewards for hard work done.
Are Teenagers Educated About Personal Finance? There are various resources for teens interested in personal finance, from workshops and books. How to Money: Your Ultimate Visual Guide to Finance by Jean Chatzky would make an excellent starting point, while Kalman Chany’s Paying for College may provide more specialized insight.
