Teaching Teens about Money Management

2006-11-05

Now that your teens are returning to school and have geared their minds towards learning, it’s a good time to teach them some basic money management principles. Here are some tips to help you teach your teen or even pre-teen some facts about money.

Determine a Budget
We talk a lot about budgets. Budgets are the cornerstone of a financial plan no matter what your age is. Families will spend on average about $500 per child for back to school items like supplies, clothes, shoes, tech gear, etc. Take care of the essentials – i.e. clothes and supplies, and then give your teen a budget for extras allowing them to choose what they purchase. Now they may blow it all on a pair of designer jeans, or purchase 3 pairs Arizona Jeans. This activity will tell you a lot about how you’re teen views money and the value of it. Take this opportunity to discuss their purchase without belittling their choices. Ask them to explain their logic in the decision process on how they spent their budget.

Let them lead by asking them to create a list of weekly expenses such as lunch, gas, and entertainment. Talk to them about how much you will contribute towards funding these items. Allow them to spend their funds the way they choose to, if they blow their funds on junk food or other unnecessary items; don’t give in to giving them more funds for weekend activities. A few nights sitting at home, maybe just what is needed.

Make Saving Mandatory
As part of their budget planning, make saving a minimum of 10% a requirement. This should be done each and every time they are given their budget for the week to spend, have them put 10% away in a box or jar and take them to the bank once a month, and send them to the counter to make the deposit into a money market savings account.

When you establish their savings account, get them a debit card linked to the account. And here’s why. Many young adults graduate from high school with now clue how to use a credit or debit card responsibly. Sure they know how to use it, but they have no concept of tracking their spending. By allowing them to have their own debit card, the money they spend comes from their savings not yours. If they run out of funds, they soon will realize that they have to track their purchases and how these cards should be used.

Sometimes the best lessons are learned the hard way, but by implementing these tips, you are teaching your teens earlier and with smaller amounts of cash. This way once they start working and earning their own money they have already established some positive money management habits.

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