Teaching teens finance is about helping them develop their financial independence, while teaching them about the dangers
of modern finance. Your teenager will undoubtedly be interested in mobile phones and credit cards.
Use this as
an opportunity to discuss the dangers of these items, explaining that you need to manage their use carefully so that you don’t
spend what you don’t have. And make sure they are made responsible for all expenditure on mobile phone plans and cash
cards – it’s the only way they’ll learn the value of money.
It’s also important to start
preparing them for the adult world – they WILL leave home one day (maybe sooner than you think) and it’s important
that they know what they’re in for in terms of living costs and financial requirements. Now is an ideal time to introduce
your teenager to personal budgeting software like
MoneyTree to manage their finances and give them a solid grounding in personal financial management.
So here are some tips
for teaching teens finance:
- Help your teenager find a job and discuss their job contract with them so they know exactly
what it means.
- Discuss real living costs with them – talk about how much it costs to run the house. Grocery
bills, rates and land tax, utilities, transport costs, mortgage repayments or rent. Many teenagers have no idea how much it
really costs to live in the adult world!
- Discuss the importance of insurance and wealth protection, as well as saving
for future financial goals and retirement. Explain that the sooner they start saving the better, because of the power of compound
interest!
- Show them an excel budget spreadsheet or introduce financial planning software.
- Show them how to
pay bills online and discuss online payment security.
- Show them how to evaluate offers and advertisements, particularly
for mobile phone plans and the like – take some real advertisements and calculate how much each offer would really cost.
Of
course, one of the most important things to teach your teenager is how to use a credit card wisely.
Credit
card debt is becoming increasingly more crippling for our teenagers, and it’s only because they don’t know how
to use a credit card wisely.
A great way to get your teenager started is by giving them a secured credit card
or debit card – secured by their own money of course. They look like a normal credit card, but is secured by money you
have on account so you can’t spend what you don’t have.
And teach your teenager how to manage a credit
card (because inevitably they WILL get one):
- Explain the dangers of credit and how quickly credit card debt can get
out of control.
- Chose a card with a low interest rate and low annual fees. Always read the fine print!
- Don’t
be tempted to accept an offer for a higher credit limit. Get a credit limit that matches your budget and stick to it!
- Stick
to your budget!
- leave your credit cards at home if you don’t plan any purchases. Just carry enough cash for
your daily requirements.
- Save all receipts and match them against your credit card history to make sure it’s
all correct – check that there a are no double ups on charges or charges you didn’t authorise.
- Contact
your credit card provider AS SOON AS YOU NOTICE ANY ERRORS.
- Compare your credit card statement with your budget and
make sure you still have a positive cash flow. File all your statements for budgeting purposes.
- Pay bills on time!
And pay the full amount if you can. If you need to carry some over (it WILL attract interest), aim to pay it off as soon as
possible. Cut down unnecessary expenditure until you do.
- Keep your credit card and personal details secure and safe
from identify theft. Report suspected fraud or identify theft to your credit card provider AS SOON AS POSSIBLE.
The
aim of the game with teens finance is to give them their financial independence by giving them all the tools and education
they need to survive an adult world – and support them while they make this transition, as it can be quite daunting,
no matter how well they are prepared.
Check out this fun site full of
finance games. There’s also these
12 principles of money and other
money lessons you can work through with your teenagers.
Related Topics:
