Lesson 1: Stress Savings!
There are many reasons that saving is first on this list. Teaching teens about money needs to begin with how they can save what they earn. Having savings can protect them against a lifetime of debt and financial security.
- Saving money can help teenagers reach a financial goal and have more respect for the purchase. For example, putting a down payment on a car. When they’re more invested in the vehicle, you can bet they’ll be safer driving it.
- Saving money is one way to avoid life’s hiccups, aka unforeseen incidents. If they lose their job or head off to college but still have expenses like car insurance, their savings will help.
- If they have money saved, they’ll earn financial peace of mind. Life as a teenager is stressful enough – why make it more so by worrying about late payments.
- More Money = More Independence from you. The more money they save, the less they have to rely on you and the more financial decisions they can make on their own. Teens need some financial independence and it is made possible due to savings.
Here is another article we wrote that talks about savings. If you are interested in setting up a savings account for young person, talk to a RMLEFCU representative about our piggy bank savings account. We’ll automatically kick off their savings with a $25 CD!
Lesson 2: Avoid Debt
- If they have an income source, aka job, your teen may want to open a credit card. Teach them to build credit by making routine purchases and always paying the balance in full. In fact, keep stressing this advice in whatever way you can by repeating, “If you can’t pay your bill off in full each month, DO NOT use credit.” We have starter credit cards with very low interest rates in case they end up having a financial hiccup.
- Set them up with a debit card so that instead of borrowing the money and paying interest (if they don’t listen to advice in #1), they will see the immediate withdrawal of money from their account. This is helpful for teaching teens how to budget. Use online banking for real time financial tracking.
Lesson 3: Distinguish Between Needs and Wants
If your teenager understands humility, they’ll be better able to put wants and needs into perspective. You can teach humility by being an example of it yourself. If you’re sporting only the top end brands, telling your teen that name brands are a waste of money will ring hollow. Teach them to be thankful by modeling gratitude in all your interactions. A great way is to find out the causes that interest them and encourage them to volunteer. Offer to accompany them or drive a friend too!
It’s not necessarily wrong to spend money on what you want but may not need. In fact, the comfort and convenience of wants can add to your quality of life. However, spending on wants should come only after you have taken care of your needs.
Teaching teens about money does not have to be a painful endeavor. It’s crucial teens hear about money matters from their parents since they certainly won’t learn these kinds of lessons in school and learning them in real life can be very expensive. If it helps for you to share some of your youthful spending mistakes, go ahead. Or you can change names to protect the guilty party!