Finance Lessons for Your Teen
The current economic environment has caused many to reconsider their personal finances; resulting in lots of people having to drastically change their spending and savings habits. Out of this economic malaise may arise an opportunity to instill the right financial habits in your teens, and they can carry these habits with them into adulthood. Just as our parents or grandparents of the Great Depression era developed deeply ingrained attitudes about finances from their experiences, our teens can share in the lessons of the more recent “great recession”. As a parent, it is important to make your teen a partner with a stake in your family’s financial enterprise.
For most teens, their ‘payoff’ is not actually about the money itself- not yet anyway. It’s more about what the money can get them – weekend entertainment, clothes, toys, cars. Money, no matter its source, is simply the means to an end. When the family goes through a “belt tightening” it may be an opportunity to turn these ‘teen expenditures’ into motivators for learning about budgeting, savings and smart financial management.
Get Them on Board
Teens have a stake in the family’s financial picture so it is important to communicate to them the family’s goals (especially as they relate to the teen), the current situation, what has changed and why, and their role in the new financial plan. It doesn’t necessarily mean that what they have been enjoying will suddenly stop; rather, they need to become more accountable for their expenditures and begin to gain a sense of satisfaction from smart financial management.
- Have them set their own goals and priorities. It’s a good time to start them with a financial journal for budgeting and record keeping. Some teens might respond well to a software program such as Quicken or Microsoft Money. Get them to distinguish between ‘needs’ and ‘wants’, and then prioritize.
- Have them develop a budget based on their priorities and other goals. Some teens are looking ahead to be able to buy a car or finance a trip; and their savings for future needs or wants should be a part of their budget. Both the expenditure side of their budget and the revenue side should be negotiated to the point where everyone is agreeable.
- Have them establish a relationship with a bank. Have them meet the bank manager, and set up a savings account.
- Get them to want to save. If they understand that their wants will need to be financed, in part, from their savings, they will soon see the value in it. You can further encourage their saving habits by applying a “match” to their savings, by making a contribution to their savings account, or better yet, an RRSP. For many RRSP accounts there is no set minimum age requirement (besides being of working-age), with parental consent.
- Show them how they can become a millionaire. Teens have aspirations and dreams just like adults and, given the chance they will share them with you. Talk about how if your teen’s money is properly managed, they could become a millionaire by the age of 40 by saving just $250 a month starting today (if you’re not sure how, speak with a financial specialist).
Teens are adults in training and, given the opportunity, they will demonstrate increasing amounts of responsibility and a penchant for smart financial management. Certainly they can be motivated by their own wants and needs; however, when they begin to see the vital role they play as part of their family’s financial picture, they may surprise you and exceed your expectations.
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