3 Monetary Tips You Can Teach Your Teen
If you are the parent of a teen, there are lots of things you’ll want to teach them. For instance, you’ll probably teach them how to drive. You might have the sex talk with them at some point, and you should certainly speak about drugs and alcohol with them as well.
One more thing to talk about with them is finance. There are some financial habits that adults should have, and you should teach your teen these.
We’ll go over three financial tips right now that you can teach your teen.
Don’t Spend Money They Don’t Have
If you let your teen get a credit card, it’s not a bad idea, provided that it has a spending limit. When you talk about budgeting for teens, one of the most critical things you can teach them is not to spend beyond their means. In other words, you can tell them that:
- They should never carry a balance on their credit card unless they have no alternative
- Before they use the credit card for anything, they should check their bank account balance
Many teens get part-time jobs, which is an excellent way for them to earn some spending money. They can also open a savings account or checking account and link their credit card to it.
Once they do, you can tell them they should never buy something unless they have the money in their account right then to pay off the credit card when the bill comes due. This way, they won’t carry a balance and ever have to pay interest.
They should do this as an adult as well. If they are out of work, desperate for money, and they are drawing on their credit because they need cash for food or a rent or mortgage payment, that’s the only time they should ever carry a credit card balance. Otherwise, they’re spending money on nothing.
Create a Budget and Stick to It
If your teen is living under your roof, you are probably allowing them to do that for free. Most parents don’t charge their teens rent.
However, they will probably still have some expenses. Those might include:
- A clothing budget
- A car repair, gas, and insurance budget
- A food and entertainment budget
You might buy your kids the clothes they need, but if they’re a sneaker enthusiast, they may want to buy some new shoes with their own money. If you bought them a used car to drive to school or their friends’ houses, you probably want them to pay for the insurance, gas, and upkeep themselves.
They should also have an entertainment budget if they want to meet their friends at McDonald’s, go bowling, see a movie, etc. They can allocate money in their budget for all that as well.
You can show them how to calculate what their paycheck will be each week and how they can designate a certain amount for each part of their lives. Then, if they have spent their entertainment money for one week, for instance, they will have to wait till the following week to go out with their friends again.
You Can Teach Them About Investing Strategies
It’s also never too early to begin teaching your teen about investing and diversification. They won’t want to play the stock market at their age, but you can start to teach them a bit about how it works if you’re ever active in that area.
You can teach them a little about mutual funds, bonds, and other investment vehicles. If they get some money from an older relative, you can show them how to compare bank account interest rates. You can talk to them about opening up an IRA and the difference between a Roth and a non-Roth IRA.
You might tell them about CDs and money market accounts. You can show them your portfolio and tell them about picking a financial consultant if you use one.
The earlier you start to teach your teen about all of this, the more likely they will do well with their money when they get a little older and move out of your house. You can teach them about being frugal, which they will probably need to do if they go to college.
In the post-pandemic era, many young people will find monetary matters challenging. If your teen takes a practical approach, then hopefully, they will never find themselves in a deep hole from which it will be hard to emerge.
