Seven Ways To Teach Your Teen Money Management
Teaching your teen money management should be the first thing on your mind if you’re going through the credit repair process. As you may know first-hand, many people find themselves in financial trouble because they didn’t have any education on personal finance. For this reason, teaching your teen money management is crucial so they never have to go through the credit repair process themselves.
These days, most schools still don’t teach personal finance skills. Even still, there are definitely some things you can do to teach your teen money management. In this blog post, we share a few ideas.
Seven ways to teach your teen money management
Encourage your teen to download an app that helps with money management
In an effort to boost your teens money management education, financial apps for generation Z are on the rise. One useful app is called Current, which helps young people understand personal finance and money management. Another free app is Credit Stacker, which teaches teens about the importance of credit. Because this app functions as a game, it helps make the process of learning about credit fun, and your child will be more likely to use it.
Show them how to set up a personal budget
One of the best things you can teach your teen is how to set up their own personal budget. This will show them the ins and outs of money management before they head out into the real world.
A good place to start is to show your teen your own budget. This will allow them to see firsthand how you keep track of what is coming in and what is going out. In an effort to make this more realistic for your teen, you should have them be responsible for handling money for their clothes or other things related to their lifestyle. When teens make the connection that they will have to do more chores or work more hours to get more spending money, they begin to realize the value of money for themselves. If they are just given money from you, they will never fully realize this important lesson.
Buy a money management course for your teen
If your child is an older teen who loves learning and has some spare time once the homework is done, he or she might enjoy taking a course. To find a list of some of the best free personal finance courses, you can check out this article (https://studentloanhero.com/featured/free-personal-finance-courses-2019/). You may even want to take the course alongside your teen, so you can both learn something new about money management.
Show them the real costs of living
With debit cards and apps like Venmo, our society is moving further and further away from using cash. This makes it that much harder to show our kids the true cost of their spending. When using a debit card instead of cash, you don’t see the immediacy of your money leaving your hands. For this reason, it is important to consistently show your teen the steps of different financial transactions.
As an example, when it comes time for your teen to get their license, show them everything that is taking place on the financial side of things. Have them be present for the purchase or lease of the car. Keep them in the loop as you move through the process. You also should discuss car insurance with them. Showing them how expensive insurance is for them compared to yours can be a real eye opener. You also want to make sure to discuss the costs of maintaining the car. Gas, oil changes, repairs etc. Doing this is an important aspect of teaching your teen money management.
Another way to show your teen the financial behind the scenes is to have them watch you pay your bills. Set up a time each month where you go through your bills. Let them see how much the bills are and how you plan your budget around them. Teens need to have a clear idea of what it means to live within your means and stick to your budget as a family. Take them through every step of bill payment. You will be doing them a huge service by showing them every detail. With debt so rampant today, do what you can to save your child from creating debt for themselves.
Teach them the difference between “good” and “bad” debt
Debt will inevitably be a part of adulthood whether it be because of a necessity or a choice. You need to teach your teen the difference between good debt and bad debt.
- Good debt: Two examples of “good debt” would be a mortgage taken out to purchase a home or a student loan taken out to fund your college education. With a mortgage, you are financing an asset (your home) over a long term that will go up in value over time. With a student loan, you are financing your education which will hopefully lead to a higher paying job. Both of these types of debt are seen as helping you build wealth over the long run.
- Bad Debt: An example of bad debt would be credit card debt or a car loan. Unless you are paying your credit card in full at the end of the month, show your teen how detrimental credit cards can be to their financial well being. It is crucial that they understand that they are working with “money” that comes with a hefty price tag, interest. Show them how interest rates work and how much they would be paying if they accrued a balance on their card. With a car loan, you are borrowing money for something that loses value the moment you drive it off the lot.
Talk about the importance of their credit
A healthy financial future is largely tied to one’s credit. With that being said, the power lies in the hands of parents to teach their children and teens the importance of their credit report and credit score. Take the time to explain what makes up their credit report and how their credit score is determined. If you don’t know yourself, take the time to learn about it. Knowledge is power and the more financial knowledge your teen has, the more confident and capable they will feel. This will help them greatly when it is time to start their own financial journey as an adult.
Be honest about your own struggles with finances
Does your teen know that you’re currently going through the process of credit repair? If not, you may want to consider inviting your teen to follow you through the process. Show your teen your credit report and explain to your teen the steps you are taking to repair your credit. Being honest with your teen can teach them an important, real-life lesson.
Have you already found successful strategies for teaching your teen money management? We’d love to hear about what’s worked in your family. If you’re looking for helpful information on personal finance to share with your teen, consider visiting our Resources page for helpful tools and guidance.