Teaching Teens Financial Responsibility: You’ve Got This!
For many teens, spending money is one of their first forms of freedom. As their parent or guardian, it can be challenging to help teens navigate this new freedom with success. You’ve paid for essentially all their expenses so far, and you may wonder, how will your child fare when they have to manage without you?
The good news is that you can guide students to make the best choices possible. Here are some tools and ideas to keep in mind when you are teaching teens the value of a dollar.
Remember your teenage years. The angst, the uncertainty, the hormones—being a teenager is an experience everyone goes through, and almost no one comes out unscathed. A little grace can go a long way, so first remembering your own teenage experiences will help you strike the right tone as you drive your lessons home.
Listen first. Teens are just like everyone else. more likely to listen if they feel heard. Ask your teen what is important to them, and how they feel about money. See what they already know and discover what their perspectives and goals are.
Be open and honest about finances. When dealing with your own financial challenges or even regular ole bills, invite your teen to listen and discuss what you’re working on (within reason). Perhaps invite them to the table to discuss how to address a challenge, like a high credit card bill. They may have creative ideas that surprise you. You can discuss the perils of high interest rates and instant gratification as well as the virtues of budgeting and cost-cutting for long-term benefits.
Demonstrate confidence and honesty. Let teens know that even though you have tough choices to make, everyone is safe. Don’t scare them that the house is in jeopardy. At the same time, don’t dismiss the potential gravity of any situation. Being honest about financial consequences shows you respect your teen and may inspire them to be honest about struggles they’re experiencing too.
Bring them along for the ride. If you’re car shopping, go through the buying process with your teen by your side—especially if you are buying a car so they can drive. Ask their opinion about what to look for in a vehicle, then show them how the bells and whistles have corresponding price increases. Let teens play around with payment calculators, so they understand that while that price tag may seem reasonable, there are other factors (like insurance and interest rates) to consider as well.
No, seriously, bring them with you. Bring your teen with you when you need to conduct banking. Let them observe and get a feel for how banking works. It will build familiarity and take the pressure off when the time comes to conduct their own banking.
Boil down the basics. Teach teens basic principles of saving, budgeting, and building credit.
a. Savings. If you’ve already started a savings account for them, before you hand it over, go over key elements, like where to find the best interest rate and how to maximize that investment over time.b. Budgets. Offer your teen a basic budgeting tool to see where their money is going, and to plan for upcoming expenses.
c. Credit. Introduce the idea of a credit score, ways to maintain a high score, and why it matters. Zia Credit Union members can track their credit with Savvy Money. To find it, simply login into online banking or the Zia mobile app. It’s an excellent, free tool that doesn’t count against your credit score.
Understand that we all make mistakes. Teens may make mistakes with their money. Even the most diligent, fiscally responsible teen can fall prey to spending sprees or account negligence (typically during their first year living away from home). You can help teens learn from this by keeping communication channels open, and by demonstrating empathy and understanding.
Gradually hand over. A gradual shift of handing over expenses generally helps young people build good habits. Children might start with a set amount to spend on vacation or while shopping. Teens may begin to own subscription services, like games, movies, music, and shopping. For young adults, you might hand over auto insurance and phone bills. Gradually handing over financial responsibilities lets young people develop their budgeting abilities over time, without completely overwhelming them all at once.
Being there. Before you know it, your child will be on their own. By listening to their concerns, involving them in your decisions, showing understanding when they make mistakes, and gradually handing them more responsibility, you are laying a good foundation for their financial success. Keep communication open, and you may find they still turn to you for advice or support even after they leave home. You’ve got this!
For your family, you don’t have to be the only financial guide or resource. Bring your teen to your credit union to start building their financial experience.
Whether it’s depositing pennies into your littlest’s first share account, or depositing paychecks from your teen’s first job, their trusted credit union is always here. We’ve got them covered!