As George Bernard Shaw once said with such eloquence and an understanding, “A lack of money is the root of all evil.” It absolutely is. Sure, having money isn’t everything, but not having it is.
It is the very thing that makes the world spin on its axis. Yes, that is a sad fact, but is a fact nonetheless, which is why we find it so absurd that schools don’t teach financial understanding.
Having knowledge on the way money works and how you can become more financially stable are surely priorities.
It’s totally the main aim of the education system is to feed students with the kind of knowledge that will land them good jobs. But a good job with good money can only work if they know how to use that money.
After all, it isn’t a salary that makes someone rich, it is their spending habits.
That is where you come in
As a parent, it is your responsibility to teach your teenage child all about money management.
It may not feel like the biggest priority to them right now, but learning the basics of financial management is what will help them to grow into independent, successful and debt free individuals, and that should be a priority.
So, to help you do this as smoothly as possible, we have come up with a list of top tips you should pass onto your kids. Who knows, it could turn out to be the most lucrative part of their inheritance.
#1 Teach Them The Terminology
One of the things that make everyone squirm when it comes to talking money is the jargon the professionals use. It makes us feel unprepared, inadequate and out of our depth, and that can lead to a whole host of other issues.
That is why you should do all you can to understand what the different terms and concepts mean and then educate your kids. Teach them what the difference between debit and credit is and what APR stands for.
Teach them about debts, interest rates, payday loans, risks, returns and savings accounts. We’re not saying this will be easy, nor will be a simple task, but it will be immensely important in their financial success.
#2 Good Credit Goes A Long Way
Credit cards are evil. Unfortunately, they can also be very necessary, as this fact will attest: in 2015, over 40% of households relied on a credit card to pay their basic household expenses.
Just to confirm, this wasn’t out of choice. But it isn’t just debt that credit cards can rack up, it is also a bad credit card rating, and that can lead to a lot of limitations and complications.
That is what you need to teach your kid about. There is a great article at https://www.thebalance.com/, but essentially you need to teach them how a good credit score is essential to get a mortgage, to rent a home, to buy a car, to start their own business and improve the interest rates at which they get other loans. That is why it is so important to understand how credit cards work.
#3 Nothing Beats Budgeting
Another thing you need to teach your kid about is budgeting. Nothing beats budgeting.
A great way to get them into this habit is to give them a weekly or monthly allowance and ask them to set about writing a budget that shows exactly how they plan on spending their money.
Once they’ve done this, have them make a list of their daily spend habits or everything they buy with their allowance. At the end of the week/month, go through the results with them.
We all learn better by doing and learning exactly how to budget what money we have is absolutely essential, which this achieves.
#4 Never Too Early For Compound Interest
Very few people have the ability to think forty, maybe even fifty, years ahead. But encouraging this kind of foresight in your kids could be the best thing you ever teach them because the earlier they start saving the better.
Yeah, we’re talking about teaching them the benefits of compound interest and having a retirement plan, in which we recommend you speak to the professionals at http://WealthTreeFinancial.com.
There is no such thing as too early when it comes to saving money and accumulating compound interest, and that is what you need to explain.
You need to explain how a little bit saved today has the ability to add to hundred and thousands a few years down the line.
#5 Save Early And Save Often
There are a lot of benefits that can come from saving, not least of all responsibility and dedication. That is something that your child should learn about when they are in their teens.
Let’s say they want the new iPhone 9.5S (or whatever the latest model is), but you’re not too keen on accumulating debt in order to achieve this.
This is the perfect time to put their budgeting skills to the test and start saving. We’re not fools, we know this won’t be easy and that you will have to show more resilience than the Stark’s do in Game of Thrones, but it will be worth it.
They will learn the value of saving and the rewards you reap from it. What’s more, you may be surprised by what they do with the money once they’ve saved it.
They may decide they don’t want to blow it all on a phone after all. What a lesson that would turn out to be.
#6 The Unexpected Can And Will Happen
When you’re in your teens, nothing that drastic or emergency-like tends to happen, but you should still teach them how to prepare for it.