While most teens still rely on their parents, that doesn’t mean they can’t start learning how to be smart with their money. The younger we teach teens crucial financial lessons, the sooner they will start to build essential budgeting skills that will help them throughout their lives. It could start with parents sitting down with young ones and introducing them to financial topics, or you could even bring in a financial advisor to encourage them to learn age-appropriate tricks of the trade. Conversations could start around simple things like spending habits, or even discussing future savings goals like moving out or going to college.
Read about the essential financial lessons we suggest for teens.
Establishing Credit
Time is money when it comes to building credit. The longer you make payments on time to your credit card, the more credit you will have increased over the years. Start by helping your teen open a bank account and get a credit card. Of course, you want to make sure your teen learns that they can’t spend frivolously on their credit card. This means discussing with them the benefits of paying your credit card bills on time and not accruing any credit debt. The sooner they start building credit in their name, the better their credit score will be when there comes a time in their life to make a large purchase, such as real estate.
Learning How To Save
It can be hard to save money when your teen is not making a lot of money or hasn’t had their first job yet. Whatever their current status, saving is still possible. Even just saving as little as 25 dollars a month could give you 300 more dollars a year. By teens learning to start small with what they have, they can slowly start building enough savings for their essential needs or fun activities, such as attending a concert or going shopping with their friends. An advisor can also be a great asset for teens looking for tools to track their spending and save more annually. The earlier they build savings habits, the more money they will have in the long run.
Don’t Inflate Your Lifestyle
Some call spending more than you earn at work “lifestyle inflation”. While it’s okay to occasionally treat yourself to something nice if you do it consistently your bank account will not be able to catch up. Outspending your earnings could make it harder to eventually invest or build the life of your dreams. With teens on social media nowadays seeing adults live lavish lifestyles, they need to remember how crucial it is to live within your means. The sooner young people learn this lesson, the sooner it may help them avoid too many financial mistakes and land them in debt.
Conclusion
While it can hard to admit your teens have grown older and will soon be young adults out in the world, it’s crucial to help them gain financial literacy and feel confident budgeting for their future. If you don’t feel comfortable having these conversations yourself, a financial advisor is there to help.