Tips To Help Teens Become Good Money Managers
Today’s generation of teenagers face a number of challenges when it comes to managing their money. They are a targeted market inundated with advertising, they can easily obtain credit and debit cards, and, overall, they have been raised in an age of greater affluence with higher expectations when it comes to material goods. So, how do we ensure that they have the skills to manage their finances in the future? Parents can start by teaching their teenagers good money management skills:
Start Budgeting Young
Because kids are very impressionable, discussing good financial behaviour with them at an early age is very important. Allowances and part time jobs are excellent ways to teach your teenagers to handle their money constructively. Encourage teens to save a percentage of their income no matter how little money they are making.
Model Good Behaviour
Parents are role models to their children. Children and teens will learn their attitudes about money management and spending by observing what you do. It is essential for youth to see both parents involved in overall family budgeting, which teaches them that women and men can take an active role in financial planning. Parents should be reasonable with gifts they give their teens. When money and material goods come too easily, adolescents may develop the attitude that they can have anything they want with minimal effort.
Teach Teens the Art of Saving
Create a ”spending plan” with adolescents. Help them to decide what to spend and what to save by setting short-term goals, which may include saving for a bicycle or for Christmas presents.
Communicate about the cost of living with your teenagers. Talk to them about mortgage rates and cell phone bill expenses. You might say something like, “to live in this house costs $1000 a month” or “the monthly fee for your cell phone is $35 – that’s $420 a year!” Most teens would probably be amazed at how much things actually cost.
Help your Adolescent Establish Good Credit
Credit is too easy for teens to get. High school graduates can obtain a “grad” kit from their bank to request as many credit cards as they want. Parents should reinforce the idea that only one credit card is needed in case of an emergency. If your teenager tends to be reckless with money, encourage them not to apply for a credit card. Advise adolescents that credit is not free money, and has to be paid back. Teens should know that deciding to not pay a bill could affect their credit ratings for 7 years, which can show up in their permanent credit files. It is important to let teenagers know that too many negatives in their files may result in future difficulties obtaining an apartment or financing a car. Parents should emphasize that good credit ratings could qualify someone for a lower interest rate versus the maximum interest rate at the bank.
Develop Guidelines for the Use of Debit Cards
Although using debit cards are more financially sound than credit cards, it is still important to talk to your teenagers about how to use them carefully. Encourage your adolescents to keep track of their debit card usage and transaction fees. This is a good way for teens to learn how to balance a chequebook. If your teenagers are having trouble managing the use of debit cards, promote the use of cash.
Remember, helping your teenagers to practice good budgeting habits now, helps them continue these routines into adulthood.
Heather Cudmore is the Credit Counselling Manager at Carizon Family and Community Services.