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Does your teen have a good sense of how to handle his money? Does she spend her allowance too fast and then beg for more? Will a part-time job interfere with school?
Increase your teen’s money IQ! Making sure your teens are smart about managing money, and being able to wisely budget what they do have, is one of the more important lessons that you, as a parent, can teach.
As Rachel Cruze, the daughter and co-presenter of personal finance author and radio host Dave Ramsey, who speaks to young adult audiences around the country at the Dave Ramsey Show’s Total Money Makeover Live! events, says, “If you don’t teach your kids about handling money, who is going to? The Kardashians? MasterCard? Who is influencing them?”
Teach them Early
Cruze strongly suggests your teens get a part-time job, because it’s vital they understand that money comes from working. You don’t want them growing up with what Cruze calls an “entitlement mentality. ” If your teens don’t understand what it takes to earn money, they’ll continue to think it comes from your back pocket. So establishing a work ethic early on is extremely important.
Whether it’s birthday money or their salary from a job, going to the bank with your teens to open a checking account is a must. As teens learn to reconcile their account online, they learn to watch their cash flow. And while it doesn’t hurt for them to know how to write a check, it’s more likely they’ll use a debit card, which helps them learn how to understand “plastic” without the possibility of incurring debt.
“I’m really against credit cards,” Cruze says, as she encourages parents to talk to their teens about the importance of not having any debt. “Lastly,” Cruze says, “when it comes to helping your teens be financially responsible, it’s important to remember that your children are watching you. So ‘just do what I say, not what I do’ doesn’t cut it. Do you lease a new car every two years, or go on a shopping spree on your credit card when you get stressed or depressed? Your kids see this and think that to live this way is normal.”
It’s not just financial experts who agree that it’s good to set up a bank account that your teens can access online. Leslie Jackson, a parent of three, made sure her tech savvy kids had online accounts and found that they loved knowing exactly how much money they had from a pretty early age. While jobs for teens in her area were tight, she found a summer job listed on Craigslist for the 16-year-old parking golf carts, and now he’s working part-time at the local Tenplex on weekends year-round. “College is just around the corner,” Leslie says, “and he’s recognized the need to save for it.”
Shop the Sales
Jessica Horton, community manager for the non-profit community service organization Money Management International, says, “It’s important not to let teens buy everything in sight, or worse, you buy it for them. They need to be- come savvy shoppers. Whether it’s clothes or video games, show them how to shop around and wait for a sale or coupon. Teach them to compare prices online, and at different stores. Giving your teens the freedom to make mistakes when they’re 14 or 15, so they don’t repeat them at 24—when they’re responsible for rent and a car payment while earning an entry-level salary—is a great life lesson,” says Horton.
Help Your Teen Avoid Debt
According to Forbes magazine, the average college graduate has four credit cards and $4,100 in credit card debt, plus student loan debt. So it really behooves you, as a parent, to be sure your teens understand the best way to conserve, spend, and budget their money before they’re in debt over their heads.
Top 10 Budget Basics
- Show Me the Money: Have your teens spend 1–2 months using an Excel spreadsheet or just writing down every purchase so they can see where their money is going.
- After Tracking: After keeping the money diary, help them make a list of potential cutbacks. Making adjustments each month as they discover what they can truly afford and what they can’t.
- Monthly over Weekly: Provide a monthly allowance, requiring they make it last. With a prepaid student card or debit card from their checking account, they will have a spending record to review.
- Needs vs. Wants: Help your teens categorize expenses as needs (expenses that are unavoidable) and wants (expenses that can be cut if necessary).
- Make a Wish List: Have them make a list of all the things they would like, or need, but can’t afford. Once they stick to a budget, many teens learn they can purchase what’s on their wish list.
- Addressing Shortfalls: A part-time job, or cutting back on expenses, such as renting a DVD rather than going to the movies, can help if the money in the bank account isn’t lasting as long as it should.
- Control Impulse Buying: Encourage your teens to think through spending decisions, rather than impulsively buying right away. Show them how to compare prices online and save money by waiting for a sale or coupon. Many stores offer deep discounts if you download their app.
- Responsibilities and Age: As you shift spending responsibilities to your teens—a car or trip with friends, for example—they’ll need to effectively manage their own money by putting these big-ticket items into a spending plan. Help them look at the overall costs and strategize making the purchases happen.
- No Bailouts: Don’t be your teens’ financial savior or, they’ll never learn to manage money. No doubt they will make spending mistakes along the way, so be sure your teens know they can come to you for information, support, and advice. Just not more money!
- Some Rapid-Fire Tips for Teens:
- Resist impulse buys.
- Don’t shop with friends who spend a lot.
- Bring lunch to school or work.
- Stay away from vending machines and convenience stores.
- Only visit an ATM once a week.
- Entertain at home.
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