by Stacy Francis, CFP®, CDFA, Founder Savvy Ladies
Practical Money Tips for Raising Financially Mindful Children Start at Home.
I read in the newspaper the other day that in a survey, high schoolers answered only 48% of basic personal finance questions correctly. The number was only slightly higher – 65% – for college students. This is scary, as good money management skills are crucial for success – and for peace of mind. It all can start at home, where you, as a parent, can teach your children important financial skills about money.
Five Great Money Lessons that Can Help Your Teens Get Ahead in Life.
Money is not an intuitive skill; it takes practice, time, and education to learn how to be responsible with money. Teaching your child about money is an essential life skill that will benefit both of you in the long run. So, first and foremost, have open and honest conversations about your own money and the family money so your teens understand the value of having money conversations – start the conversation over a meal and make it a monthly habit to ask and talk about money with your child on a regular basis.
- Explain the importance of budgeting. How many teenagers do you know who always run out of money mid-month and beg their parents for more? Teaching your teens to prioritize can make a huge difference as they grow into adults. Understanding saving and spending with their own bank accounts and debit cards is an ideal way for your child to see how the money flows in and out of their account.
- Establishing credit. Regardless of how you feel about credit, the minute your teens are off to college, their mailboxes will brim over with credit card offers. If you teach your teens to handle credit while they’re still at home, the damage is likely to be much smaller. The biggest advantage of a student credit card is the ability to build credit, but your teen needs to be responsible for paying the bill each month, or it can adversely affect future credit if not used responsibly. When looking for the right student credit card, your teen needs your guidance to help understand the fees associated with having a credit card, the monthly payment plan options, and the importance of not spending and charging beyond the monthly means. It’s all a good lesson, but it’s best not to be caught short and have to pay fees each month and get into credit card debt.
- Differentiating wants from needs is, in essence, knowing the definition of fixed vs variable expenses. This is a crucial skill in all aspects of life and no less important when it comes to money.
- Filing tax returns. By becoming familiar with the filing process and learning a few tax smarts, your teens can save a ton of money later on.
- Creating an Emergency Fund. Taking all costs of living into consideration so if a job is not available or job cuts happen, your teen has saved 6-9 months of living expenses to cover the unexpected. Many teens tend to forget about things like insurance, maintenance, and repairs when estimating how much their next car is going to cost them. Taking all variables into consideration when making money decisions – no matter the specific circumstances – may be the most valuable money lesson of all.
Having financial conversations with our children shows that you, as the parents, take money seriously, and you will be setting up your teen with the essential money management skills for a lifetime of financial success.
