Over the past two week’s I have talked about teaching your toddlers to save, Your tweens, and now your teens. Teaching your teen to save and budget is one of the most important things you could ever teach them. No teen should graduate high school without knowing how to budget or balance a checkbook. It starts with you, though. Your teen is learning their financial habits from you.
Teaching Your Teen To Save
The first step to saving is income. Your teen needs to find a job. It can be an after-school job at a local grocery store, or a temporary job during you teens breaks from school. A lot of companies hire during the summer looking for teens. It’s time they start really working and earning a pay check.
A Checking Account
If your child is mature enough, a checking account is a good way to teach your teen responsibility and teach them how to balance a checking account.
Set the account up together and talk about the importance of keeping the account balanced, not over spending, and the consequences of over spending. Make sure your teen knows if they overspend there will be a fee.
The good thing about a teen checking account is the parent can keep an eye out on the account. At some banks, the parent can put a “spending limit” on the teen’s debit card. I would start with a low daily balance until you know your teen is ready.
Besides a checking account start your teen a checking account.The first thing they need to save is an “emergency fund” I would suggest a fund of $200-500 to get them started. Starting an emergency fund now will get your teen in the habit of having an emergency fund as they get older.
Sit down with them and come up with a savings goal. Maybe they want a car. If you plan on helping them match what they save. If you don’t plan to help financially find a reliable car for a decent price, then set that as the savings goal.
Don’t just set your teens account up and let them deal with it. Have a monthly check up. Sit down with you child at least once a month and talk about where they stand, where they can improve, and how well they are doing. Make is a conversation about savings, spending, and the future. Talk to your child about checking their account balance every day. Teach them to spend 2 minutes per day checking over their account.
When your teens turn 18 or right around their 18th birthday, the mailbox is going to be filled to the rim with pre-approved credit card offers. If you do not talk to your teen about anything else in this post, please make sure you talk to them about why they shouldn’t abuse credit cards. Make sure they understand a credit card isn’t free money. A credit card at this age is a gigantic mistake.
A credit card at this age should be out of the question. Teach your teen just to say NO. Teach your teen a credit card isn’t not an emergency fund. I use to say I didn’t understand why credit card companies would give an 18yo a credit card, but it’s because they are easy prey. They rack up the debt with either a low-paying job or no job at all, and then the fees just start adding up.
Your kids are going to develop money habits whether it be from you or someone else. Make sure they get the right information and start their life out on the right foot financially. Teaching your kids about money isn’t always easy, but the time you put in now can save your teen a lot of money and hard ache down the road.