Teens learning money management

One of the most valuable gifts a parent can bestow upon their child is to teach them wise money habits. Lessons can begin early in life and can come in the form of discussions and explanations, practice, and role-modeling. It is never too early to begin, and advisable to start teaching good money habits even before the teenage years.

There are countless real-life opportunities to explain wise financial decisions. Examples range from voicing the selection of a sale item over a non-sale item, all the way to explaining why it is a good time to invest in the stock market. As a child hears these explanations over the years, they will begin to understand the rationale behind making sound choices with respect to spending and saving. Parents can engage their child by asking questions, such as “what is the best deal in the store as far as sweaters?” Another approach is to create activities, such as writing out a grocery list and seeing who can find the most coupons for items on the list.

As teens get jobs and acquire their own spending money, parents should set guidelines so that they can practice implementing wise financial strategies. Parents may require their teen to designate a certain percentage of their paycheck to go into savings. They may also ask that the child track their spending or set a goal for saving enough money for a special purchase.

Parents who are comfortable sharing their finances with their teens should do so, as it is an excellent teaching tool. This is a way for teens to learn how to balance a checkbook, use a budget, and plan for the future. Parents can also role-model and discuss key issues such as avoiding high-interest debt, the concept of purchasing items that are needed versus desired, and the importance of building up reserves of money and assets. Another way to teach the value of money is by avoiding buying children everything they want, even if it is within your means, as well as not overbuying for birthdays and holidays.

Once teens leave the nest, they are usually bombarded with credit card offers and are often not fully aware of how expensive it can be to fully support oneself. They may be easily seduced into racking up thousands of dollars in high-interest debt, which can lead to a downward financial spiral. Parents who put forth a concerted effort to teach their teenager wise money habits will likely save grief and financial heartache for their adult children.