“Money doesn’t grow on trees” is one of the first money lessons we learn. It teaches us the value of hard work so we can earn our own money, but it doesn’t really offer much insight other than telling us the brutal truth. When teaching teens about managing their finances, novelist and philosopher Ayn Rand offers a better chunk of wisdom: “Money is only a tool. It will take you wherever you wish, but it will not replace you as the driver.”
There are online resources that can help parents teach their kids about financial literacy. It’s never too early to start. It is particularly important to teach teens, who are at that phase when they are beginning to exercise financial independence. Some parents would advise their children to invest their savings or earnings from doing summer jobs. If you would like to take this route as well, you can get a general idea or even in-depth views of how things work in the investment business from websites like Mark Matson Reviews.
There are three basic lessons you can incorporate into your teen’s financial education. With these, your child will be able to develop the knowledge and skills needed to manage their money in the real world.
Managing job earnings
Teens with part-time jobs are able to earn their own money for expenses, such as movies or eating out with friends. Have a talk with your teen and discuss where the earnings will be used. You can also suggest setting aside a portion of the earnings for his or her college fund. This is also the time to explain how taxes work and how these can decrease the amount of his or her take-home pay. Encourage your child to open a savings account to which a portion of their earnings can be deposited.
Developing a spending plan
By teaching your teen how there should be a balance between the money that’s coming in and going out, he or she will be able to learn to do budgeting. Consider giving out his or her allowance on a monthly basis, and tell him or her that the money must last for the whole month. Teach you teen how to make a budget and categorize expenses—is that bag a need or a want? With these lessons, teens can learn to rethink their spending decisions and devise ways to cut back on unnecessary expenses.
As children grow older, they begin to have bigger goals. From toys, these could evolve into gadgets and even a car. What is your teen saving up for? Encourage your child to write down his or her goals. Teens would usually want to have something their other friends have; it is important to explain to your child that though it may look ‘cool’, it is not a necessity and that the money can be used for something more important, like a college fund. You can also motivate your teen to save by opening an investment account for him or her, and explain the benefits of continued contribution.
Like driving, managing money takes practice, and there’s bound to be few bumps on the road. Let your teen feel that you are someone he or she can ask for support, advice, and information, even if he or she makes a few mistakes along the way.