5 Ways to Teach Your Teen-Young Adult to Manage Their Own Finances

By on September 24, 2015
5 ways to help teens manage own finances

By Patrick Vernon –

It’s a very good idea for your teenager to learn some good money management habits as soon as possible. During the teen years money often starts to arrive in larger quantities as they start jobs and it’s a step up from when pocket money was their sole source of income.

It’s easy for your teen to let this sudden largesse slip through their fingers in a rash of impulse purchases and general overspending. While some ‘leisure spending’ is an enjoyable part of life at any age let alone the teen years, it’s also important to encourage your teen to manage their money properly. It’s a life lesson that will stand them in excellent stead and something you can help with. 

1. Saving

Instill into your teen the importance of developing a saving habit. A basic financial principle is the idea of saving at least 10% of what you earn gross to develop a ‘paying yourself first’ mindset. 

Encourage your teen to set up a separate savings type of account and have the 10% moved into it automatically. This gets your teen used to the money entering and then leaving their bank account – like when the bills eat away at their balance later on in life – so they won’t miss it. They’ll enjoy having spending power for essentials later down the line, especially if some of their friends haven’t been so sensible.

2. Understanding overall costs

Items like mobile phone contracts can seduce teens into ‘overdoing it’ financially. The ‘per month’ rate and the chance to own a state-of-the-art smartphone like an iPhone or similar should be tempered by your teen calculating the overall cost over the term of a contract. The overall sum might cause them to think again.

Calculating the whole cost applies to any finance arrangement they’re thinking of entering into. These include bank loans and other finance arrangements for a larger purchase such as a car. Don’t allow them to get sucked in by the lower amount – turn their attention to the higher figure for a dose of fiscal realism.

3. Financial consequences

You may consider providing some financial help to your teen. Maybe you’ll be helping them with a larger purchase such as their first car, or a series of driving lessons along with practical help in learning to drive but you shouldn’t just bail them out if they blow all their money on a regular basis. When it comes to driving, for example, encourage them to save for lessons, shop around for the best instructor and use free learning materials to help with the process.

Choosing to spend money as soon as it’s acquired is all very well, but your teen needs to learn there are consequences. If you constantly ‘clear up’ after them financially, they’ll take much longer to master financial management. You could call it being cruel to be kind but it’s an important lesson for your teen to learn.

4. Setting budgets 

Budgeting is a great skill for your teen to learn. You can show them how to budget for smaller items such as travel, subsistence and everyday expenses up to budgeting for major purchases such as their first car or planning a big trip such as an extended period travelling.

5. Setting a good example

How you handle your own finances and your financial principles will rub off on your teen. If you’re careful with money, plan purchases and keep a tight grip on things like credit cards and other loans it’s likely your teen will adopt similar habits. Consciously and sub-consciously, they will follow your lead.

A cultural mind shift

It can be difficult to rein youngsters in when money starts to flow more into their lives. Trying to get them to think ahead and avoid temptation isn’t easy, but the more you can do the more it will help them.

Patrick Vernon is a freelance writer, with experience writing for a range of magazines and websites, researching various topics in order to offer useful info and content to the public.

 

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5 Ways to Teach Your Teen-Young Adult to Manage Their Own Finances