Teenagers are eager to start making their own decisions, become more mature and have increased responsibility. Teaching them about financial success can help to satisfy all of those needs. Helping teens to understand how to be financially smart will help provide a framework for money decisions and will prepare them for the real world. Here are six important lessons to prepare your teens for financial success.
Lesson 1: Create a budget.
The only way to help teens learn good spending habits is to teach them about budgeting. Start with offering small allowances for meeting small goals. This will encourage them to be invested in earning whatever they want to purchase. It will also teach them how to save money. Also, encourage them to get a part-time job to obtain a regular paycheck. Then, review their income and expenses with them. Creating a budget will help them understand the benefits and drawbacks of spending, as well as how to make smart spending choices with their income.
Lesson 2: Save, save and save.
There is no better time than the teen years to learn the benefits of saving money. Excess funds will likely not happen for many years down the road, so understanding how and why to save will provide solid skills for the future, regardless of how much or little money they earn. Teach teens to pay themselves first from each paycheck by putting a portion into a long-term savings account. Make sure a debit card is not attached to the account so that they can’t easily spend from the account to encourage saving.
Lesson 3: Avoid debt.
These days, countless credit card offers are sent out to young adults and teens, who do not fully understand the possible pitfalls. These offers are enticing, as they provide easy access to a line of credit, and even bonus money for signing up. Although, teens need to be educated about what it means to charge and pay interest. If they fall into a debt trap, this can take years to recover from, and could ultimately affect the course of their retirement.
Lesson 4: Become price-conscious.
Teens need to understand the terms pricing and value. When grocery shopping, have your teen help with the list and the budget. This ownership will help to teach decision-making when it comes to prices and how to get the most for the available money. It is also essential in the high school years for kids to understand wants versus needs, especially with peer pressure, and to understand how to manage purchase decision-making.
Lesson 5: Prepare for college.
Whether you’re taking on the expense of college or will be ultimately sharing it with your children, teaching them about the expenses and financial support associated with four years of college is important. College is the first freedom they will have, and while they should be able to focus on schoolwork as well as enjoy the college experience, having a balanced approach so that teens understand how the increasing expenses will be paid will help to set financial expectations.
Lesson 6: Maintain a positive mindset.
Although it’s important to educate teens about the consequences of not saving, overspending and using credit cards, it’s important for finances not to be painted as forever a pain point. Having a positive mindset when teens are learning the basics about financial freedom will help to position finances as rewarding and enjoyable. There is nothing worse than stress related to finances and it truly is unnecessary, if values are instilled at an early age to allow teens to practice positive real-life tips, then put them into practice for the long term.
If you’re interested in starting a 529 college savings account or have financial questions about preparing your family for the future, the team at Bayntree can assist. Please schedule an appointment on Bayntree’s online calendar by selecting the date and time that is most convenient for you! You can also always reach us by emailing info@bayntree.com.
Bayntree Wealth Advisors provides comprehensive financial planning and wealth management. The Bayntree team specializes in all aspects of financial health, including retirement planning, risk management, investment advice, tax strategies, estate planning and insurance.
Bayntree does not provide specific legal or tax advice. Please consult with your tax advisor or legal professional for guidance with your individual situation.
