Any parent of a teenager is well aware that teens can spend money before they make it. As soon as your teen has a fistful of cash in their pocket, it seems as though they can’t spend it quickly enough. If you have hopes of seeing your teen turn into a financially responsible adult, you must start teaching them about proper money management now. Here are six ways you can teach your teenager to be responsible with their money:
Be Their Example
Kids learn by example. Now is not the time to use the “do as I say, not as I do” approach. If you expect your teen to save money, you must save your own. Sit down with your teen and show them how you budget your money. Let them see how much you save every two weeks, or every month, and explain to them why you’ve chosen that amount. Once your teen sees you saving, they are more likely to do so themselves.
Wants v. Needs
If you’ve never explained the difference between wants and needs to your teen, now is the perfect time. Explain to your teen that there are things that they need, such as shelter, food and water, and things that they want, such as smartphones, MP3 players and the latest pair of tennis shoes when they’ve got three perfectly good pair sitting in their closet. Teaching your teen the difference between wants and needs will help them make smarter decisions when it comes to spending their money. Teach them to ask the question, “Do I want this or do I need this?” before making any purchase.
As long as your teenager is performing well in school, they should be able to handle a part-time job. Whether the job is on the weekends or for a few hours after school, allowing your teen to earn their own money is the first step on the road to financial responsibility.
Buy Their Needs, Not Their Wants
Once your teen is earning money on their own, whether through a part-time job, babysitting or even completing chores around the house, make a deal with them that you will supply their needs but they must pay for their wants. Explain to your child that they have a certain amount of money each month for entertainment and that if they spend all of their money, there won’t be any more until their next pay day. Expect your child to spend their money quickly at first. You’ll need to stand your ground! No lesson will be learned if you’re handing over $20 as soon as your teen spends all of their money.
Open An Account
Help your child open a savings account and set a savings goal. How much will your child put into their account each month? At least ten percent of their paycheck should be put away. To encourage your teen to save, you may want to make matching deposits if you are financially able to do so. Be sure to put a cap on the amount that you’ll match!
The “Mock” Market
Here’s a fun way to teach your teen about investing: sit down with the business section of the newspaper and let your child pick a stock to follow. Write down a pretend deposit amount in a notebook and then begin to watch the stock each week. Add or subtract “money” as your teen’s stock experiences gains and losses. Follow the stock for at least 90 days and, at the end, figure out how much your teen would have made or lost.
Teaching teens about financial responsibility doesn’t have to be a burdensome task. Follow these six tips and you’ll be well on your way to having a young adult who can not only support themselves, but thrive while doing so.
Christine Lukes is a personal finances guru and freelance blogger. She often recommends using bbt bank online accounts.