Teaching Your Teen to Save Money
While your teen probably doesn’t feel that learning budgeting skills is a high priority, teaching money management skills is an essential part of raising independent kids. Everyone needs to be money smart and it’s not something that’s being taught in most schools. So the responsibility of getting your child ready for adult financial independence is on your shoulders. Fortunately, there are plenty of ways you can help your teen with this.
Start with a game. Websites like PracticalMoneySkills.com and Learn4Good.com have free games that teach teens about money management. Teens can play “Papa’s Cupcakeria” or “Shop Empire” to learn about financial business skills. The Practical Money Skills site has “Financial Soccer”, “Financial Football” and “Road Trip to Savings” offering teens multiple choice questions to help them move money across the football or soccer field and teach them about why they need to save and how to do it.
Teach them the importance of earning their own money. Help your kids learn the importance of earning money by paying them for chores instead of giving them an allowance. Instead of handing them a $20 bill when they’re heading out with their friends, teach them to control their spending based on their income. Help them create a spreadsheet to budget their income and expenses so they can keep track of their own spending habits. You can also offer them an advance on their earnings with a “loan” that they will pay interest on. If they’re out of cash and want you to spot them a $20, let them know that they will have to pay it back by earning it with chores and you will deduct a dollar or two in interest for the privilege of receiving the money before they’ve earned it.
Teach them how to use credit wisely. A study by the International Journal of Business and Social Science found that just 9% of college kids pay their credit cards off every month. Help your child be in that minority by teaching them the importance of using credit wisely and how they will save money by avoiding interest fees.
The next time you use your credit card in your teen’s presence, have a conversation and point out that it’s borrowed money and that you’ll be paying more for your purchase if you carry a balance. When the bill comes, sit down with your teen and show it to them, specifically the box explaining how long it will take to pay off and how much it will cost if you only pay the minimum balance each month.
Make sure your teen understands that you’re “graded” on your credit card usage and regularly paying late, for example, could result in a higher rate on a mortgage or car loan.