Like many parents, you worry about your child’s future, everything from their grades to extra activities that will look good on a resume. However, it is equally important to build their financial skills as well, since they’ll need to know what to do with their money once they have it; saving vs spending.
Why Can’t I Spend It?
It’s difficult for teens to be patient. They are still in an impulsive phase of their development so seeing and wanting something usually equates to buying it. Dave Ramsey recommends teaching your teen how to create and stick to a budget. This not only helps them prepare to save their money for future “big ticket” items but it also helps them manage the practical aspects such as monthly bills.
My Money Can Make Money?
While working hard and saving is an important skill, getting your money to work for you saves a lot of time at the office. Teach your teen about opening a savings account and be sure to search around for higher interest rates. An advantage of the internet age is access to online banks that are able to offer rates almost double what you find at community banks.
Teens can even invest in stocks or open accounts such as a Roth IRA with a parent as the custodian. These strategies can help your teen realize that being careful with their money and thinking about the future can pay off without having to double their effort.
What Do You Mean I Have to Pay It Back?
Teaching teens to make a budget and save a portion of their money in a savings account can help them avoid the pitfalls of the credit card mentality. Rachel Cruze compares debt to living with chains around your neck. Many people, teens especially, fall for minimum payments and cash back credit card ploys that may mean starting out life in debt.
Saving money now, beginning with their very first job, can prevent the need for credit payments such as cars or school. This can help your teen reach their goals now and in the future. While it is important to teach about responsible credit it’s also important to teach about savings account services. If they learn about budgeting, saving, and their own spending habits as teens they’ll be able to grow those practices into credit lines.
If you are looking for skills that will translate into other aspects of their lives, then teaching your teen to save and budget their money is one of them. Your teen will be able to begin their lives debt free and maybe even a little ahead of the crowd.