One common sentiment echoed by parents everywhere is that they want little more than for their kids to have the best chance in this world. Many parents see to this by preparing their children early for college entrance exams, hoping that good grades will lead to acceptance to a good college, and subsequently a good life. So with some kids preparing as early as elementary school for their college career, why shouldn’t a teenager of any age learn some fundamentals of sound money management as well? After all, it’s an important life skill, and one best learned before that first solo rent check or student loan payment is due.
Of course, this doesn’t mean sitting a 13-year-old down with books on Milton Friedman, macroeconomics, and investment strategies in the new millennium. There are practical ways parents can instill a sense of fiscal knowledge and responsibility in their kids that should pay dividends over time in the form of a happy life free of overwhelming debt.
Money Management Tips for Teens
Establish a Fiscal Pattern
It’s best to get the teen in question started with an after-school or summer job as early as possible. But even more important than installing the beginnings of a work ethic in the young person is having them learn how to properly manage the money he or she earns. Parents should establish a savings and spending plan that sees about 30-40% of their child’s money placed in a savings account, with the remainder going to the child.
Some younger folks will likely object to having a portion of their money placed in savings, as it will often deprive them of certain wants, like tech gear and fashion accessories. In these instances, parents should have their child set aside even more of their cash and set a target goal for when they should be able to afford the item they want. This does deprive kids of a certain amount of instant gratification, but it instills in them the notion of diligence.
Start Building Credit
Having the teen sock away money in a savings account doesn’t merely teach him or her thrift – it starts them on the road to building credit. Parents should ensure their teen is generating enough cash to make regular deposits in their savings account. Starting early will help them to one day purchase a new car, home and pay off that student loan.
Start Saving for Retirement
These days there’s every reason for teens to look past college graduation and well into the future to retirement. Parents should help their child set up an IRA upon turning 18 and depositing money into it each and every year. It’s simple math: those younger folks who sock away five grand a year every year until retirement are going to have twice as much cash as folks who put money into their retirement accounts beginning in middle age.
These are just a few strategies parents can implement to instill in their children a healthy respect for the almighty dollar. Because while science, math and reading the classics are crucial to a well-rounded education, so too is learning about the ways of modern economics.
written by: Chris McMurphy
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