MONEY MANAGEMENT

 

The 3 most important financial lessons for teens (age 10-17)

 

Parents with teenagers know nothing comes easy, including money management. But with young adults facing mounting levels of student loans and credit card debt, building a strong financial foundation early on is more important than ever. Learn how teens tend to spend and save and consider teaching them age-appropriate money habits that can last a lifetime.

 

                                           Know where the money comes from

While many parents give their teens an allowance or pay for things directly, others earn their money through independent jobs.

                                                      Understand the benefits of saving

Most teens save their money, and by putting a little away each month that can grow into big savings over time.

	Saving $25 a month	Saving $50 a month
1 year	$300	$600
5 years	$1,500	$3,000
10 years	$3,000	$6,000

 

 

                             Think long term

Focusing on the future can help teens start saving their own money and teach them to better accomplish the goals they set for themselves.

 Your child may not have a full-time job or a mortgage. But basic budgeting skills can help him plan spending and set him up for long-term success handling money. Here are six steps to get you started.

1

Help your child determine his income

 

The first step in building a budget is figuring out how much money comes in. For tweens and teens that means regular income, such as paychecks from jobs and allowances, as well as money given to them on birthdays or holidays. Have your child add up what he receives in a month—that’s his total monthly income.

2

Calculate required expenses

 

Required expenses are necessary costs you must pay regularly—they’re the must-haves. For a middle or high schooler this could be a monthly cell phone bill, or gas and car insurance if your child drives. Total these costs over a month to determine a baseline set of expenses.

3

Do a little math

 

Once you have a total for the required expenses, have your child subtract that number from her income. This reveals whether she has enough to cover her necessities, as well as how much money is left over.

4

Talk about the fun stuff

 

Once you’ve covered necessary expenditures, explain that what’s left can go into your teen or tween’s savings account. She also could use extra funds for discretionary purchases such as going to the movies or buying concert tickets—the nice-to-haves. But remind her that money is finite, and sometimes that means making trade-offs. For example, explain that buying an expensive piece of clothing now may mean postponing a bigger purchase.

5

Help him get what he wants

 

Tweens and teens may not be able to afford some big-ticket items right away, such as a bicycle or even a car. In this case you can help your child set a savings goal and then plan how to achieve it.

6

Balance the budget

 

You can teach your child that spending should not exceed income. If your tween or teen overspends, you can help him look for ways to cut back spending or increase income. For example, he may decide to carpool one month to save on gas and use the extra funds to buy a concert ticket. Teens can boost income by taking on extra jobs, perhaps mowing a neighbor’s lawn or babysitting.