As a parent, it’s crucial to impart smart money habits onto your teens before they decide to flee the nest and assume their newfound responsibilities as the captain of their own finances. With a hands-on teaching style, your first-year college student navigating the unforgiving “real world” will feel financially prepared to spread their wings.
Understand that teens with limited financial literacy often collect debt quickly, a bankroll ball-and-chain they’ll drag with them during their formative college years.
With these long-term consequences in mind, make teaching your children about money management a top priority. That way, your blooming teenager can make smart decisions and save early on, setting them up for future success. However, some parents may find these conversations uncomfortable.
To dodge awkward or intimidating discussions, check out the following topic starters and advise your teen on proper money management.
The importance of good credit
So, where should you begin when teaching money-management skills to your teenagers? Start with the importance of good credit. Although your teen has likely heard of good and bad credit before, they may not fully understand the concept. Make an effort to explain the ins-and-outs of credit building and repayment, allowing them to ask questions along the way.
In addition, encourage your child to begin budgeting and explain how proper financial planning works. To give them a full picture, consider using a loan or interest calculator to show your teenager how small payments can add up.
For college-age kids, help them set up a student credit card like those from 1fbusa. These cards have excellent benefits, from rewards programs to waive foreign transaction charges to no annual fee. Remember, student cards are perfect for those first-year students without established credit. Not to mention, they’re handy tools for building credit as a young adult.
Start training early
Allowing your child to help out with small monthly charges can set them up for success when paying larger bills in the future. Have them cover small payments early on, like a cell phone bill or partial car insurance. By paying a small amount each month, they learn responsibility and discipline, both critical traits for proper financial management.
If you have young children, have them earn money by doing household chores and set up prize systems they can purchase along the way to teach them about saving and budgeting early on.
Teach responsible spending habits
Most teenagers are drawn in by the latest and greatest tech or entertainment, leading to reckless spending without proper discipline. Ultimately, your number-one goal should be to inform your impressionable youngsters that happiness doesn’t come with a price tag, and it’s better to save than spend with no regard.
Additionally, comfort your teen by ensuring responsible spending doesn’t mean being a complete miser. Spending money on fun non-essentials is fine— so long as they don’t swipe their card for anything without thought. Teach them to save for big-ticket items and discourage overspending on trivial things.
Impress upon them the importance of interest
Credit cards can feel like free money for teens and college-age youths, causing them to swipe without thinking twice. Teach them the importance of paying back credit cards in full and on time to avoid hefty, racked-up fees.
Before opening a line of credit, your child should understand interest, payback periods, and budgeting to avoid incurred debt early on.
Determine how documents operate
Once your teen has a card of their own, they can begin to build credit. However, the documentation accompanying credit card applications can be daunting. From confusing fine print to credit scores and reports to package information, owning a credit card comes with its fair share of daunting paperwork. Before they apply, go over card management, documentation, and score reports to ensure they’re ready to take on a big financial responsibility.
To wrap up
Having money talks with your teen may seem intimidating, but they’ll reap the financial rewards. By educating your child early on and teaching them the ins-and-outs of responsible money habits and budgeting efforts, they’ll be ready to take on the future without heaps of debt.