Teaching teens about money is a lot like teaching them about life: it’s not an exact science, but there are some clear ways to help them make good decisions. Here are nine best practices that will help your teen avoid making costly mistakes and get the most out of their money.
Teach Budgeting to Teenagers
Teach teenagers to budget their money. A good way to start this is by giving them a weekly allowance and encouraging them to spend their money wisely. Teenagers are often notorious for having little or no sense of financial management, but with the right guidance and encouragement, they can be learned how to make wise decisions about their finances – including how much money they should save and when it’s appropriate to splurge on an item they really want.
It will help teens understand the difference between a want and a need if you explain that most basic needs (food, shelter) are covered by our parents’ income until we’re adults; anything else is considered “extra” or “wants.” By helping teens distinguish between these two categories, you’ll encourage them not only learn how much money you need each month for basic expenses but also train them about saving for important things such as college education at some point in the future.
Setting Up Bank Accounts
It’s never too early to start teaching your teen about money, which means setting up a bank account for them. As soon as they have a job and are old enough to work, this is one of the first steps you should take. It will help them learn how to manage their own finances and also train them about interest rates, credit cards, debit cards and more. Here’s what you can do:
- Decide which bank would be best for your teen based on its location (this way they can go there with friends), its fees (make sure they don’t charge an annual fee or monthly maintenance fee) and its mobile app capabilities (the ability to pay bills online).
- Train them how to choose between opening a checking account or savings account at the bank. Checking accounts allow users access their cash—and overdraft protection if needed—but also come with fees if there isn’t enough money in your account at any given time (fees vary by institution). Savings accounts don’t offer this feature but do earn interest when deposited funds stay untouched for six months or longer; however these too may charge monthly maintenance fees on top of other charges like ATM withdrawal fees so shop carefully!
Finally: train teens on how much money should be kept in cash versus checking/savings accounts so that they know what’s available at any given time without having large sums sitting around unprotected against theft.
Balance between Saving and Spending
Teaching teens how to manage their money is a delicate balance between saving and spending. You want your teen to be able to save up for things they want, but you also want them to be able to spend their money responsibly when they need it. The best way to train your teen about this balance is by showing them what it looks like in practice.
When you give your teen an allowance, make sure that you set aside some of the money for savings and some for spending. This will help your teen see the difference between the two so that when they get older, it won’t be such a shock when they have access to more money than ever before!
SAVE FOR A RAINY DAY
- Set a goal.
- How much do you want to save? And how often should you save? The amount can be as little as $50 a month, or as much as $100/month. The frequency depends on your income and your spending habits; if you’re just starting out, it might be better to start with less frequent contributions so that they’re not missed too much.
- Get started with an automated savings plan. If possible, open an account through your bank or credit union that has no fees and automatically transfers money into the account when it is available—for example, right before payday when all of our checks have been deposited into our checking accounts for the month but we still have access to some cash at hand (we’ve got bills to pay!).
- Open an online savings account that lets us monitor our rainy day fund from anywhere in the world (and don’t forget about any other savings goals). Make sure this one’s FDIC-insured so there aren’t any risks associated with having access while away from home—and we’ll never miss another opportunity!
BEWARE OF CREDIT
It’s important for teens to know about credit cards and how they work. Credit cards are not free money, and can be difficult to manage if you don’t understand the effects of using one.
- Credit cards work by allowing you to spend money now and pay for it later, usually with interest. This is called a “loan.”
- You need to be very careful when using a credit card because they are like cash (except that they aren’t), so it’s easy to overspend. If you have the money in your bank account, then why do you need the plastic? The answer is that you probably shouldn’t buy something with your credit card—you should put some thought into what kind of value it will bring in return before making that purchase decision.
- If teenagers want their parents’ permission before getting their own credit cards (or debit cards), they should wait until they are old enough and responsible enough not just financially but also mentally and emotionally as well—and this usually means around 18 years old or older depending on how mature each teenager is!
WORK HARD FOR YOUR MONEY
After you’ve taught your teen the value of saving money and what it means to have a budget, talk about how much hard work goes into earning the money they have.
In our generation, many people are able to get away with not working hard at all. But that’s not true for everyone—and even if it is, it won’t last forever. When you work hard for something, whether it’s money or anything else in life, there’s a greater sense of accomplishment than if something was given to you without any effort on your part.
Make sure your teen understands that everything costs something (or someone does). Nothing comes easy in this world! The sooner they understand this concept, the better equipped they’ll be when working towards their goals later on in life.
MOTIVATE BY EXAMPLE
When it comes to teaching teens about money, it’s important to set a good example. If your teen sees you treating money with respect and responsibility, they’re more likely to follow suit. If they see you spending all of your paychecks on unnecessary things, they might think it’s okay for them to do the same.
Share Your Financial History With Your Teen
Your teen will be better equipped to handle their own finances if they understand where you came from financially, what mistakes you made along the way, and how you’ve learned from them. When you share your story with your teen, don’t just focus on the negative aspects—be sure to talk about what worked well for you and how those experiences have shaped your financial identity today.
Have Regular Family Financial Conversations
It’s important for parents and teens to talk about money regularly so that both parties are aware of each other’s expectations. By having regular conversations about finances, parents can help guide teens in making smart decisions about spending habits before they make major purchases (like cars or houses). Having these conversations early on will also help prevent problems down.
Have a set amount of money for spending, saving and giving
The first and most important step to teaching teens about money is to have a set amount of money for spending, saving and giving. You need to decide how much you can afford to spend on essentials such as food, clothing and shelter (you’ll probably want to set up a separate account for this). After your monthly bills are paid, leave some room in your budget for fun stuff—but not too much! Make sure they save at least 10% of everything they make (for example: if they get an allowance of $15 per week, at least $1 should be put into their savings account). And finally train them that when you give others something or share with them freely without expecting anything in return—that’s called generosity.
The idea here is that each kid will have three types of accounts: spending money; savings; and charitable donations. They can take out whatever they need from each category at any time—but only within reasonable limits. For example: If you allow your kids $200 per month for clothes shopping then after a few months you will see what works best for them so far as style choices go–and then adjust accordingly next time around!
Teach them to avoid Trendy Clothes, Shoes and Cosmetics, Smartphones and Apps, Video Games and Consoles, One-Click Online Spending
To avoid impulse buys and spend less, you can also:
- Avoid trendy clothes, shoes and cosmetics.
- Teach them not to overspend on smart phones and apps.
- Help them avoid video games and consoles.
- Teach them to be wary of “one-click online spending” which can lead you into a slippery slope of debt if the purchase turns out not to be as good as it seemed at first glance.
Teach teens about money by teaching them how to save money by making gifts for birthdays, friends’ birthdays or holidays instead of buying expensive presents for everyone in your family (or theirs).
Teaching your teens to manage their money wisely, save for the future, and maintain good credit is a great way to set them up for financial success. Poor money habits will affect them all their lives and keep them constantly struggling, but good money habits will allow them to have all the things they want in this life. You may even be able to learn something new about money management while you’re teaching them.
Also Read :- 11 Best Ways To Foster Creativity in Your Teens