The standard advice about how to build credit is to get a credit card and use it responsibly. This line is parroted...
There are a lot of lessons you want to teach your teen before the age of 18 and before he/she leaves home—and financial lessons top the list. It’s important that teens have several basic skills that they can fall back on when they’re no longer waiting for Mom or Dad to hand over cash every time they’re running a little short. Take the opportunity to teach your teen these key lessons.
Lesson 1: How to Write a Budget
Money coming in needs to be greater than money going out. Unfortunately, many teens struggle with this simple skill! Make sure your teenager knows how to write a budget and, more importantly, how to stick to it. Teach your teen how to look at income and check out bills, and how to balance the two as effectively as possible.
Lesson 2: How to Create a Savings Account
Having a solid savings account sounds great! Unfortunately, many teens have no idea how to go about creating one. A haphazard habit of stuffing whatever money is left at the end of a paycheck into a savings account will have a slow payoff, especially if your teen tends to spend to the very end of a paycheck. Teach teens to set aside a specific percentage of their checks at the beginning of the pay cycle, before they start spending. Then, teach them how to stay out of that savings unless a genuine emergency crops up.
Lesson 3: How to Use a Credit Card and Debit Card
Pull out your credit card, insert in the chip reader or swipe it, and voila … you walk away with your purchases. It seems simple enough. The reality, however, is that your teen needs to know exactly how to use a credit or debit card and the difference between each—including how to keep track of money spent. Most of today’s financial institutions offer apps that will allow immediate financial tracking. Teach your teen how to track debit card spending and how to make the necessary credit card payments, even the nickel and dime spending that happens when he/she grabs a soda at a gas station or picks up a candy bar at the grocery store. Those little purchases can add up to big results!
Lesson 4: What Things Cost
Many teens have an unrealistic view of the actual cost of things in the real world. If money has always come from Mom and Dad, they may not realize what they’re actually spending. By exposing them to what things really cost in during the teenage years, when it’s less significant, you’ll put them in a better position to deal with spending as they get older. Consider sharing the cost of their increased car insurance policy, letting them take care of their own car maintenance payments, or even sitting down and letting them take a good look at your actual budget so that they won’t be blindsided by expenses when they’re on their own.
Lesson 5: How to Live Thriftily
If you’re a military family, you’ve needed to make thrifty living choices in the past. Some of those, however, may be things that your teen doesn’t see. Provide information on how to live thriftily: what expenses to avoid altogether (like cable television), how to slice costs at the grocery store, and how to keep overall living expenses low. With this simple information, you can often provide better preparation for real-life budget challenges your teen will face down the road.
There are a lot of lessons left to teach before your teen leaves home, but instruction on how to use money effectively is one of the most important lessons you’ll ever provide. By instilling these key financial habits now, you’ll prepare your teen with a better financial background to help increase his/her overall future financial success.
Information appearing in this article is obtained from sources we believe are reliable. The information may not be a complete statement of all available data and is not guaranteed as such. Marine FCU is not responsible for the contents of this article and advises its membership to investigate claims before following the information provided.