Financial literacy is an important life skill that all teenagers should learn. The sooner you start teaching your children how to handle money, the better off they will be.
The money habits they form when they are young can be carried over to adulthood.
If you wait until they’re adults to start teaching them about money management, they may have already developed unhealthy spending habits. Dismantling bad habits is much harder than forming good ones.
In this blog post, you will learn how to set expectations with your teenager and help them develop good money habits that will last a lifetime.
Why Should You Teach Them at a Young Age?
It’s essential to start teaching your teenager about financial responsibility as soon as possible. It’s never too early.
Starting at an early age will help your teenager develop good money habits that they can carry into adulthood. It will also instill a sense of discipline regarding spending and saving.
In addition, teenagers need to understand the basics of financial responsibility before they leave home and start managing their own finances. Otherwise, they may find themselves in over their heads when they have to pay their bills and manage their own money.
Here are a few reasons why you should be teaching your teen about financial responsibility:
Financial Responsibility Is a Lifelong Skill
Financial responsibility is not something your teenager will learn overnight. This is a lifelong skill that needs to be continuously practiced.
They must understand that money management is an ongoing process, not a one-time event. The earlier you start teaching your teenager about financial responsibility, the better they will be at managing their finances as adults.
Help Shape Their Spending Habits
Children often mirror what they see from their parents and other adults in their lives. As their parent, you greatly influence your teenager’s spending habits, and you can help shape their spending habits by setting a good example.
If you’re a responsible spender, your teenager will likely develop the same money management skills. On the other hand, if you’re a compulsive shopper or tend to overspend, your teenager is more likely to develop the same bad habits.
Aside from teaching your teenager how to manage money, setting an excellent example for your teenager reinforces the importance of financial responsibility. This can help them form good spending habits that will benefit them in the long run.
Teach Them the Value of Goal Setting and Achieving
One of the most important things you can teach your teenager is the value of setting and achieving goals. This will help them understand that money should be used to achieve specific goals, not just impulse spending.
Encourage your teenager to set financial goals:
- Start small with simple goals, such as saving up for a new gadget or a trip.
- When they’re ready, you can help them set bigger financial goals, such as saving up for college or a down payment for their first car.
Your teenager should also be taught the importance of delayed gratification. They must understand the value of delaying their wants to attain their needs. Developing this mindset will allow them to succeed, not only financially.
Help Them Get Through a Tough Financial Spot in the Future
Experian’s State of the Credit report for 2020 found that Gen Z consumers (aged 24 or lower) accumulated an average of $10,942 non-mortgage debt and $1124 retail credit card balance.
While this number is lower compared to the average debt of millennials and Gen Xers, it can still be difficult for teenagers to manage their finances if they’re not used to dealing with debt.
Teaching your teenagers financial responsibility will help them immensely when they face challenging financial situations in the future.
For example, if they lose their job or experience an unexpected financial setback, they will know how to manage their finances and make ends meet. They will also be less likely to rely on credit cards or loans to get through a tough spot.
The Consequences of Bad Spending Habits
Without financial literacy and proper guidance, teenagers can quickly develop bad spending habits, such as:
- Overspending
- Impulse buying
- Lack of budgeting
They may not even realize it until it’s too late.
Teenagers are highly impressionable and are vulnerable to peer pressure and social media. Additionally, they can easily fall prey to marketing campaigns, financial scams, and predatory lenders.
Teenagers can also get a credit card when they turn 18, which can be very dangerous if they do not know how to use it responsibly.
If your teenager is not taught how to handle money responsibly, they could find themselves in financial trouble when they become adults. It is essential to start teaching them early on to avoid these financial pitfalls.
The Consumer Financial Protection Bureau (CFPB) stated, “Young people are not prepared to manage their finances when they reach adulthood.”
That’s why teenagers need to learn about financial responsibility before they become adults, and it should start at home.
10 Strategies To Help You Teach Financial Responsibility to Teenagers
To help you with this process, here are 10 strategies you can use to teach your teenager how to be financially responsible.
1. Encourage Them To Work
Wondering how to teach your teenager financial responsibility? One of the best ways to teach them is to encourage them to earn their own money. This will allow them to manage their finances and learn how to spend and save wisely.
There are many ways for teenagers to earn money, such as:
- Getting a part-time job
- Starting a small business
- Doing odd jobs for trusted family and friends
- Babysitting
- Pet sitting or walking dogs
- Cleaning cars
Not only will working teach your teenager financial responsibility, but it will also help them develop a strong work ethic. This is an important life skill that will benefit them in life.
2. Help Them Set a Budget With Guidance
One effective method to teach your teenagers financial responsibility is helping them set a budget, and you can do this by guiding and assisting them in the budget-making process.
Start by discussing with your teenager their finances and financial goals. Once you have a clear idea of their financial situation, you can help them set a budget that works for them.
Make sure to include some wiggle room in their budget so they don’t feel too restricted. And, most importantly, teach them to stick to their budget.
3. Don’t Say “No” Immediately. Enlighten Them Instead
When your teenager asks you for money, don’t say “no” right away. Instead, take this as an opportunity to teach them about financial responsibility.
Saying no to your teenager can be counterproductive, making them feel like they’re not trusted with money. Additionally, you’re not giving enough room to grow financially. Instead of saying no, explain to your teenager why you are saying “no” and help them find another way to get what they want.
For example, if they’re asking for money to buy a new phone, explain why it might not be a good idea to spend all their money on one purchase.
Help them understand that they need to be mindful of their spending and work for or save up for important things. This will help your teenager understand the importance of financial responsibility and make them more likely to be responsible with their own money in the future.
4. Don’t Overcriticize Their Financial Mistakes
Everyone makes financial mistakes, even adults. So, it’s crucial not to overcriticize your teenager when they make a mistake with their money, as this could discourage them.
Instead of criticism, offer guidance and teach them what they could have done differently. For example, if your teenager overspent on their monthly allowance, help them create a realistic budget for the following month while challenging them to spend less and save more.
5. Help Them Solve Their Own Money Problems
When your teenager has a money problem, don’t solve it for them. Instead, help them find a solution themselves.
This might mean sitting down with them and brainstorming different ways to solve their problem or giving them resources to help them figure it out on their own.
Solving your teenager’s money problems for them will only make them dependent on you and won’t teach them how to be responsible with their own money. So, it’s essential to let them figure it out themselves with your guidance.
6. Introduce Them to Money Management Apps
Teenagers are pretty much on their phones all the time. So, why not use this to your advantage and introduce them to money management apps?
Money management apps can help your teenager:
- Track their spending
- Set budgets
- Save money
It’s your turn to use technology to your advantage and introduce your teenager to your favorite money management app.
7. Help Them Explore Their Savings Options
Saving money is a critical aspect of financial responsibility. So, it’s vital to help your teenager explore their savings options and find one that best suits their needs.
- One option you can consider is a piggy bank or savings jar. This method can be a practical option for teenagers who have trouble saving money as it will help them physically see their savings grow.
- Starting their own bank account is another option to consider. This can help your teenager get in the habit of saving money and provide them with a place to keep their money safe.
- Another option to consider is a credit union like 121 Financial Credit Union. Credit unions are a great alternative to traditional banks as they offer higher interest rates on savings accounts and lower fees. They’re also not-for-profit, so their main focus is helping their members succeed financially.
8. Teach Them About “Price Consciousness”
Teaching your teenager about “price consciousness” will help them think twice before spending money on unnecessary stuff.
- One way to do this is to take your teenager shopping with you and show them how to compare prices and find the best deals. You can also teach them how to use coupons and take advantage of sales.
- Another way to teach your teenager about price consciousness is to have them track their spending for a week. This will help them become more aware of the money they’re spending and where they’re spending it.
Once your teenager becomes more price conscious, they’ll start making responsible purchases.
9. Introduce Them to Credit and Why It Matters
Credit is an essential part of financial responsibility. So, it’s important to introduce your teenager to it.
One way to do this is to help them understand the credit scoring system. Understanding the credit system will help them see how their payment history, credit utilization, and other factors affect their buying power.
Another way to introduce your teenager to credit is to help them understand how to use credit responsibly. You can do this by teaching them about things like interest rates, late fees, and credit limits.
Helping your teenager understand credit will encourage them to use credit more responsibly in their own lives.
10. Present the Advantages of Financial Freedom
It’s essential to present the advantages of financial freedom to your teenager. Financial freedom is the ability to live without worrying about money.
One way to do this is to show your teenager how much debt you currently have and how long it will take you to pay it off. This will help them understand the importance of staying out of debt. Another way to present the advantages of financial freedom is to show your teenager how much money they can save by making wise financial decisions.
Knowledge Surpasses a Lifetime
Teaching your teenagers financial responsibility now can help them avoid a lifetime of debt. It’s vital to start early and equip them with the knowledge and tools they need to make responsible financial decisions.
Help your teenager understand the importance of saving money, setting a budget, and being price conscious. Show them the advantages of financial freedom and encourage them to make wise financial decisions in their own lives.
121 Financial Credit Union has an extensive library of resources to help your teenager grow financially. We also have various high-interest savings accounts to help your teenager save more money. Call us now at (904) 723-6300 for live assistance or schedule your appointment by completing our online form.