Creating good financial habits for our teenagers is essential if we hope to see them progress into adulthood with a good head on their shoulders and financial independence. No matter their circumstances growing up, teens from all backgrounds have the accessibility and ability to learn good financial habits before they fall into poor spending habits. As parents, it is our responsibility to make sure that teenagers are equipped to enter the real world with a great understanding of the value of money, and also how to optimize financial habits to ensure financial security and growth. This could start on family weekend trips, getting them involved in the planning and then go on from there to daily activities that will prepare them for the future.
Some parents may not feel equipped to teach their children such lessons if they feel they are only just grasping some of the main concepts, but this should not distract you from making the effort to give them the relevant knowledge. There is a lot to learn which can be intimidating for a teenager who is just starting to want money to pay for all the goods and experiences they want.
If you are looking for a good place to start with teaching your teenagers financial literacy, consider implementing the following discussions.
The Importance Of Good Financial Habits
Parents who have struggled with their financial situation in the past might have a better or worse understanding of financial literacy. We should all want better for our children, therefore knowing why they are beneficial and how to express their value to our children is the best place to start. Here are some of the results of good financial habits :
- Less risk of falling into debt
- Better quality of life
- Less financial-related stress
- Creates a bigger savings pot
- Alleviates any risk during uncertain times
If our teenagers can start to have a good understanding of financial habits, they will be better equipped when they step into adulthood. Whilst reducing all forms of financial risk is unlikely, having the best knowledge of how to navigate such economic environments will provide them with a risk-free experience.
Habits To Implement
Here are some of the best ways you can ease your teenagers into the world of financial literacy:
Earning Pocket Money
If you have the money available, you should start by giving your children reasons to earn pocket money. If you have previously been giving your children whatever they would like on request, this needs to be slowly eased down. They must, first of all, be taught the value of good deeds and behaviors, and how the environment expects them to exchange their work for money.
Giving your teenagers pocket money might be their first financial responsibility, so perhaps start by rewarding them for good grades. If you would like your children to do well in school, offer them a higher value of pocket money for great grades and studying. Giving them pocket money for chores is a common use, however, they should understand that chores are an essential part of life and they will have to complete these things for themselves one day therefore they should see the reward of doing them without monetary expenses.
Start A Weekend Job
If your teenager is at the appropriate age, you might encourage them to start a weekend job in a trusted business. This might be as simple as doing a paper round, or perhaps they might start working at a local cafe for a wage. This is the first step towards them taking responsibility and having their first financial responsibility. This will include them getting a set wage which will result in professional pay slips. You should help your teenagers negotiate this process, and guide them through the process of setting up their bank accounts to be paid into. Also, talk them through their payslips and show them what each section means such as their hourly rate, what national insurance is, and all the other essential parts.
Set Them A Savings Goal
Once they have an income through their wage or perhaps the pocket money you are paying them for good school results, you should advise them on the importance of savings. Discuss with them what they would like to spend their money on, and advise them on the importance of spending money on essentials if they are saving up for something big. For example, if they would like to buy a new pair of trainers, consider telling them to avoid buying sweets and chocolate with their friends. They will see the repercussions of their own mistakes if they fail to meet their savings targets, and you can guide them where they went wrong if they keep on making the same mistakes.
Match Their Savings
If your teenagers are successful at hitting their savings goals, you should consider adding interest to their savings. Many banks offer low savings interest, and you can teach the value of having savings for your children by giving them 10% interest on top of their savings. Also, you should consider increasing the percentage each month if they hit the targets. This is a good way to also introduce them to investing, showing how their wealth can accumulate when well looked after and managed in a good account.
As mentioned, it would be a good idea to introduce them to the topic of investing. Investing is a great way to build wealth, however, it can be complicated for teens when they are only just settling into the basis of financial literacy. Show your children how you have invested your own money into assets such as property and stocks, as this will give them an introductory understanding of the value of investing.
Teach Them What To Avoidd
With all the value that comes with financial literacy, it would also be a good idea to discuss what to avoid in finance with our teens. For example, many poor money habits should be avoided such as spending more money than is left in your bank account and also avoiding lending money to strangers. More importantly with the rise of accessibility to online information, many financial scammers are now targeting teens into putting money into cryptocurrency scams and other digital investments. Make sure your teenagers know to never send money to people they do not know, as it most likely will be a scam of some kind.
Overall, our teenagers should be well-equipped with the financial knowledge that will guide them into adulthood. Laying down the foundations of good habits whilst our children are young is the best gift we can give them to find success when they begin their journey to find financial independence.