You may have always spoken openly about healthy money habits with your teens, or you might never have broached the subject of finances before. Regardless, it’s important to start having conversations about financial habits before your children reach adulthood. Having a solid monetary foundation will help them massively as they begin to stand on their own two feet.
Here, we explore some of the ways you can teach your teenager sound financial habits. Some key principles to start with are how you’ll interact with your teen. Having an emotionally healthy relationship with teenagers can be challenging, so it can help to start with the following tips:
- Practice active listening
- Try not to take their reactions personally
- Listen and be open to their responses
- Help your teen to feel safe and loved
Sit down for an honest discussion
With the above emotional ‘toolkit’ in hand, it’s time to talk to your child. Many conversations can feel patronizing to us in our teen years, so make sure it’s a two-way street. Ask them about their financial needs and wants: a need is something vital, including food, shelter, and necessary clothing, whereas wants may include things like hobbies, music, or saving for a special holiday.
At this stage, you’ll also want to discuss college, which may fall into either category depending on your teen’s life goals. Saving for college early can make their life much easier in their adult years.
Help your teen open a bank account
Many banks allow children as young as six to open their own bank accounts, provided they have a parent or legal guardian who signs for them. Different accounts will yield different levels of interest, allowing your teenager to grow their money steadily. This is particularly important if they’re saving for college.
A 529 plan is one type of account worth looking into, as it offers tax-free savings for college, including the option to pre-pay for classes and tuition. Most 529 accounts have a lifetime contributions limit of at least $350,000, giving your teenager a lot of options when it comes to saving their cash.
Show them how to budget effectively
It’s crucial to know how much money we make and have a good idea of what we spend our money on, yet it’s easy to forget about smaller, regular expenses. A good budget is divided into your income, your regular outgoings, and your planned savings and purchases. Having an overview of what you regularly pay for, such as mobile phone plans and subscriptions can help you cut down on anything that isn’t needed.
Your teenager needs to understand the importance of spending less money than they earn, as this enables them to calculate what they can afford to save and spend. Unfortunately, more than half of American teens have anxiety over their finances, so it’s crucial to help them avoid stress by teaching healthy habits early on.
Keep the conversation going
Talking about finances isn’t a one-time conversation, it should be continued openly and freely. Though it can be tempting, it’s important not to judge your teen on their spending and saving habits, or try to control how they do so. Instead, help them find their own way, whether it’s with the help of a money planning website, a financial app on their phone, or a bullet journal.
Photos:
https://unsplash.com/photos/fan-of-100-us-dollar-banknotes-lCPhGxs7pww
https://unsplash.com/photos/women-and-man-talking-outside-the-building–Xv7k95vOFA
https://unsplash.com/photos/two-books-on-wood-plank-LNwn_A9RGHo
Further reading
best back to school money saving tips
