Sunday, July 8, 2012

Six Tips to Teach Teens Financial Management

Managing money is one of the most important skills parents can teach to teens. A recent survey by Charles Schwab indicated that only 30 percent of teenagers were learning healthy financial habits from parents or guardians. Over two-thirds responded they would prefer experience over a money management class. Parents who make learning about finances a priority for their children can help them avoid struggle and confusion in the long term.

The following six tips can help plant the seeds for being smart with money, as well as intelligent, mature decision making.

1. Value

Teens can make money from doing chores or working an after-school job. When teens earn the money they wish to spend, it will have more value than it would if it was simply handed to them. This helps teens to learn appreciation for money and the discipline to work for what they want.

2. Savings

Putting aside a portion of what is earned is a great way to teach teens how to plan for purchases and investments. This is especially important in a society where instant gratification is the rule, and teens often spend money as fast as they get it. Learning to save will teach teens to plan and help them begin a more secure future.

3. Budgeting

Allowing teens to actively participate in paying household bills will illustrate how far money actually stretches. Working teens can take on the monthly bills for their mobile phones, putting gas in the car and any entertainment they wish to take part in, such as movies or concerts.
Tracking expenses will help the teens develop strong budgeting skills.

4. Credit

Using credit in a responsible manner is often a challenge for adults, which is why it is very important for teens to learn about utilizing it properly and paying bills on schedule. They should know about overdraft fees, higher interest rates and all the negative consequences of abusing credit, including being barred from buying a home or a new car later on.

5. Investment

Teens can learn about basic investment with a small amount of money. Something as simple as a short-term CD at the family's bank will teach teens about interest and how to make money grow. A visit with a financial advisor can be very educational, as can resources found on the Internet.

6. Confidence

Teaching teens financial management skills will help them to be more confident and disciplined when they leave home and head out into the adult world. Proper saving, investing and use of credit will also make them more attractive to potential employers and romantic partners in the future.

Teaching money management skills is one of the greatest gifts parents can give to teens. It is even more meaningful if the parents have struggled in this area themselves, and want their children to have a more secure and responsible life. Money makes the world go around, as the old saying goes. It also opens many doors. Parents should give their teens every advantage possible.

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