As kids transition into their teenage years, the number of responsibilities they’ll have on their plate piles up accordingly. One such responsibility is managing their finances properly.
If you haven’t taught your teen to handle money correctly, they’d likely end up being impulsive spenders. They may want to spend their entire savings on the latest gadget or the nice dress they just found in the store.
This can leave them waiting for their allowance with zero money in their wallet and bank account, which is a bad habit to form.
As a parent, it’s your duty to teach them the right spending habits. You don’t want your teen to be controlled by their finances, especially as they approach adulthood.
Instead, you want them to have a good financial foundation that can lead them to happiness and financial freedom later in life.
That said, teaching teens can be tough, especially if they already have a bad relationship with money. If you need some tips, here are six tips to help you teach your teen to become financially responsible.
Let’s jump straight into it!
1. Get Your Teen to Create Long-Term Goals
Your teenager is old enough to make heavy-hitting decisions and young enough to make it happen. They should make the most out of their youth—and one way to do that is by directing them to make solid long-term goals.
Start by helping them identify these long-term goals. Do they want to save up for a car? Do they want to go to college? Are they interested in renting an apartment as soon as they hit 18?
Tell them to list these goals and break them down in order of priority. Then, encourage them to formulate a game plan to make them realize these goals as soon as they do it.
To help them in goal-setting, you can tell them to create SMART goals. The acronym stands for specific, measurable, attainable, relevant, and time-bound. Structuring your goals using that method can make the goal more realistic and reachable.
Whenever your child feels like they’ve encountered a setback that’s pushing them further away from their goals, gently be there for them. Be patient and understanding. This way, they can look to you for support while they plunge themselves deeper into their aspirations and goals.
2. Teach Your Teen to Save in a Bank Account
Saving is an essential life skill that you should teach your teen as early in life as possible. To get them into this habit, explain the concept of delayed gratification to them first.
Teach them that by holding off on current temptations, like that ice cream from the restaurant, they can accumulate enough money to access better things in the future.
It’s not enough to just teach them how to save. You should also teach them the best place to store their pocket money.
A bank account is an ideal place for your teen to store their savings, specifically a savings account. This is because a savings account allows them to track the exact money in their account as well as allows them to deposit and withdraw easily.
Furthermore, it can also be used to slowly grow their money through interest rates and build their credit scores—the latter of which being an essential bank function that your teen will likely utilize when they’re older.
You can also take the time to differentiate between different bank accounts, like a checking account, a savings account, and a time deposit account.
By highlighting their differences, your teen can be equipped with the knowledge to manage their finances more effectively once they do get a hold of it.
Learn more about the benefits of instilling financial responsibility in teens through banking.
3. Teach Them Budgeting Skills
Teaching your teen budgeting skills is fundamental for their financial independence and responsibility. A budget helps keep track of both the inflow and outflow of cash—and budgeting is the act of controlling the budget to improve one’s finances.
Teach your teen how to create a simple budget. Allow them to list their sources of income (or allowances and gift money) and categorize their expenses. Tell them to do it every day and to track historical data as well. You may let them use spreadsheets like Microsoft Excel or apps to help them create a budget quicker.
Even if teenagers may not have financial responsibilities around the house just yet, a budget tracker can be structured to fit around a teenager’s lifestyle. For instance, it can be useful in tracking miscellaneous expenses like restaurant meals and clothing.
Furthermore, budgeting as a teenager holds many similarities to budgeting as an adult. For instance, it could help visualize their net worth or their spending patterns. These bits of data can help them change their financial behavior, which is similar to how it works in adulthood.
4. Make Them Experience Hard Work
No one wants to raise a spoiled teenager. As such, it’s important that you teach your teen the reality of society, that is, they have to work to survive. And they have to work harder to thrive.
Encourage them to take on part-time jobs and internships to experience the value of hard work firsthand. These experiences not only pay your teen for their time and effort but also instill a sense of responsibility in them.
Furthermore, these activities also make them more independent, which can grant them the confidence to develop their skills and explore opportunities on their own accord.
This, in turn, can help equip them with skills that can make them a valuable addition to the workforce, thus enabling them to live a life with financial stability.
5. Teach Them How to Invest
While teenagers under 18 can’t open brokerage accounts to invest just yet, it’s a skill that you should definitely try to teach them.
Investments are passive income streams that can help your teen become more financially secure in the future, even if their active income stream temporarily halts. They tend to grow over time, which is useful for teens as they have lots of them.
For starters, teach them the different types of investment vehicles, like bonds, mutual funds, cryptocurrency, and stocks. Then teach them what investment vehicle is best for what scenario based on their preferred investment type.
For instance, bonds and time deposits are ideal for conservative investors who want to experience slow but steady growth. On the flip side, cryptocurrency can be a viable investment option for people who have money they’re willing to lose but much to gain.
Once they turn 18, let them open their own brokerage account and let them start trading. Encourage them to diversify to different investment options and let them learn the ebb and flow of the market. With experience and patience, they can get their returns and grow their wealth in turn.
6. Model Positive Financial Behaviour
One of the best ways to teach financial responsibility to your child is by modeling financially sound behavior yourself.
The brains of teenagers are still developing, and they often take in and adopt information from the people closest to them, such as their parents.
Given this, you must practice what you preach and demonstrate good financial habits as well.
For instance, when you’re shopping with your family, refrain from buying things in excess, particularly if you’re struggling to pay the bills at home. Don’t rely on your credit card too much to cover luxury expenses. And, most of all, abide by a budget!
By taking on good financial behavior, you’re showing your teens that you mean what you say and that financial responsibility is really important. This can further reinforce your teachings and make them more financially responsible adults in the years to come.
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