Monday, January 16, 2017

Teaching Teens Financial Responsibility

Raising a child in today’s tumultuous world can be the biggest challenge of your life. 

It becomes especially apparent in the teen years, when the contrast between what you try to teach your child and the influence of peers and the media seem to be in direct opposition.

There’s one area in which many pop-culture trends go in direct opposition to actual good practices and principles that we want to instill in our children: finances. 

Maybe many of us avoid the topic because we are still trying to become financially literate ourselves. But whatever your current state, financial responsibility is an important lesson to teach your children NOW. 

It might not seem as important or damaging as drug use, but just like illegal substances, it can have a permanent effect on your child’s habits, brain, and happiness. 

While financial happiness may seem like something that’s only important on the surface, it’s important to note that financial woes are among the greatest causes of long-term depression, divorce, and stress that contributes to life-threatening illness. 

So, how can you raise fiscally responsible children in a world that just wants them to charge credit cards right and left? Here are some ideas: 

First of all, make sure that your child understands what a credit card is. 

Many parents give their child a credit card as they hit the teen years or enter college so that they have some emergency money just in case. 

Additionally, as your child hits the age of majority, credit card companies will start to pounce, advertising low interest rates and attractive fringe benefits. It’s important that before they have any access to credit cards, they understand that credit cards are not free money. 

Rather, they’re a very temporary loan that can snowball into crippling debt if not handled properly. Teach your child smart credit card habits, like those found here, and consider starting them on a debit card instead of a credit card until they gain some more experience with money management. 

Encourage them to set a long-term savings goal

This could be one of the most powerful habits that you instill in your child. After all, as you grow and your financial responsibilities become more complicated, there’s always something that you’re saving for (usually several things). 

Teach your teen to prioritize for things that aren’t coming for a long time yet. Let them have practice weighing the benefits of instant gratification against their goal to save enough money for a new car, or an epic summer vacation. 

Help them learn a habit of always setting aside some money for savings.

Let them get a part-time job. 

There’s nothing that teaches us the value of a dollar like having to work for it ourselves. Help your child understand that the cost of a pizza could equate an hour of hard work. 

They’ll start to look at price tags completely differently when they do the math. (“This shirt is three hours of work, that movie ticket is one hour, and this car repair is 10 hours.”) 

Give them a dinner night

One interesting way to teach your child responsibility is by putting them in charge of dinner every now and then. 

Give them a budget and challenge them to do both the shopping and the cooking themselves. Help them realize that, while ordering pizza is an easy solution, it can break the bank after a while. It can also teach them about incidental costs, like tips, transportation, and add-ons. 

This can teach your child about both money and nutrition. It can be a dramatic lesson to see the difference between the cost of eating out and making spaghetti at home. 

Set a fixed budget for a trip

Managing our money while we travel is hard for all of us. Unexpected costs can throw our budget off every day, forcing us to re-adjust. 

If your child is taking a trip, whether with your family or with their friends, give them a fixed budget and challenge them to stick to it. If they run out of money with three days left to go, they’ll learn that they need to start prioritizing better. 

This can also save you the stress of having to say no to their various costly requests throughout the trip. Instead, you’re putting the choices in their hands and letting them deal with the consequences in an immediate way. 

Teach them to make a budget

This can be difficult when your teen’s costs are so different from yours, but setting the habit now can help them be more wise when they manage all their own living costs. 

Remind your teen to factor in insurance, gas money, and savings first. This will help them realize how much is really available for their optional costs, like eating out or doing activities with friends.

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