The author, Mignon Mclaughlin, once said, “I wish I’d said it first, and I don’t even know who did: The only problems that money can solve are money problems.” There’s a very deep truth to this quote and it’s something parents of teenagers would want to bear in mind. Your child will face many problems in life as they get older and not all can be solved by having more money. So, preparing them for life with all its trials and tribulations may seem like a full-time job.
However, while Mignon’s quote is true, it neglects one key point most of life’s problems are often related to money. Student loan debt, marital struggles due to financial problems, financial stress caused by bad debt, becoming homeless, struggling to make ends meet because of a low-paying job, etc. are problems that millions of people deal with daily. These are VERY REAL problems… and guess what? Most of them can be solved with money. As a parent, it’d be very astute of you to teach your teens about money. In this way, they’ll avoid most of the money problems that plague others and will have less on their plate to deal with. Let’s get started…
1. Open a savings account for them
This is the start of their financial education. Having a bank account to their name with a small sum of money in it will give them a sense of ownership. Let them be in charge of their account. Give them a debit card and let them know it’s their responsibility. Deposit a few hundred dollars in their account and tell them that they need to maintain this balance instead of squandering it. This will teach them discipline and they’ll learn how to delay gratification.
2. Make financial goals with them
Spend 30 minutes or so with your teen and ask them to set a financial goal for their savings account. How much do they wish to save up and what’s the deadline? Break it down into monthly targets so that they know how much they need to put aside to meet their goal.
3. Encourage them to get a job
Having a job will not only instill a sense of responsibility in your teen but also show them the value of money. When a teenager is only given an allowance by his/her parents, the money comes too easily to them. Nary a thought is given to how they spend it. However, when they’re toiling for their wages, they’ll realize that making money in this world is not a cakewalk. Teach them to calculate the price of a product they wish to buy in terms of hours worked. For example, if they have a part-time job at Starbucks which pays them $11 an hour, and they suddenly wish to buy the latest iPhone for $800, let them know that it’ll mean 73 hours of their work. Now they’ll look at the phone in a whole new light and wonder if the phone is worth paying for, especially when their current one is working just fine. There is a price to pay for following the herd and trying to keep up with unnecessary trends. The sooner your teen understands this, the better.
4. Give them a financial education
The education system is woefully inept at giving students a financial education to prepare them for the real world. Students are not taught how to save or how to invest. They’re not guided on the dangerous consequences of credit card debt. They know even less about taxes or buying a house… or anything that’s of any financial importance for that matter. One could almost deduce that this is by design. Whatever the case, the onus is on you to make your children financially literate. While they don’t need to be expert number crunchers, they must know how credit card debt can cause immense problems. They must know about their credit history and credit score… and how to build good credit. It’s all these details that matter. Get a few books on the topic and spend some time every week explaining the different financial planning topics.
5. Wake them up!
Most teens go about their lives in their own world. By the time a kid turns 16, feel free to share the details about household bills, etc. with them. Let them see firsthand just how much you’re paying for the house, utilities, taxes, and so on. Colleges and universities these days are so liberal that they’ve created an environment where students believe that the world owes them a living. This is why they keep expecting student loan forgiveness and protest capitalism from their mobile phones. By showing them that the government takes a huge chunk in taxes to pay for other people’s welfare and how politicians squander it on unnecessary expenses, you’ll immediately wake them up to the unfairness of the setup. They’ll also learn that come hell or high water, the creditors will come for them when the bills are due and the same politicians who promised them the world will renege on their promises of debt forgiveness the moment they’re in power. This is the real world. It can get ugly, and your teen needs to see it for what it is. Then they’ll realize that not only is making money difficult but holding on to it is even harder.
6. Teach your teen about budgeting
Let them create a budget. They may choose to use savings apps on their phone to keep them on track. Educate them on the true cost of frivolous spending. Designer clothes, expensive entertainment, ridiculously-priced coffee, unnecessary car accessories, etc. will put a dent in their finances. If your teen wants to buy these items, make them get a job and work for it. As mentioned earlier, nothing wakes them up faster than spending their own money. Another point to note: never buy your teen a car until they can afford to pay for their own insurance. The parents can make the car payments, but the teen will need to work to pay the insurance. Studies have shown that when a teen pays for the insurance on their own, they’re much more careful drivers.
7. Get your teen a credit card
The earlier you get them one, the better. Many astute parents put their children on their cards as authorized users. As long as the bills are paid on time and in full, the teen will be building excellent credit. When it’s time to get a job or apply for a car loan, etc. they’ll have good credit. Then it’s just a matter of maintaining it. Practice these 7 tips with your teen and they’ll be responsible with their money when they’re adults. Countless people fall prey to debt and mess up their lives just because they can’t control their spending habits and are clueless about the way the world is set up. Now that your teen knows the lay of the land, they’ll be able to traverse it confidently while avoiding bad debt and the financial pitfalls that scare millions of unsuspecting people. Forewarned is forearmed.