Do you have teens or young adults in your home who are beginning to earn their own money? Would you like to equip them with sound financial strategies for planning for the future?
Many adults have advocated for financial literacy for teens because of a lack of financial education among young people. They often spend too much, save too little, and remain unaware of how much life will cost when they become responsible for their own living expenses.
Here are some basic financial planning tools your teens should know about.
Bank Accounts And Saving
Once your teen has some of their own money, you can help them open a bank account. If they’re under 18, you can open the account with your child, and allow them to take ownership of it once they are old enough. This is generally the safest place for kids to keep their money.
Your child will need a bank account if they want to use an ATM, write a check, or give or receive payments through applications like Venmo or Paypal. In the future, they will need one in order to buy or rent a home or receive paychecks from their employer.
Your child should also learn about saving and earning interest. A good rule to teach your teens is to save about 10% of what they earn.
Allow your child to set up a savings account and a checking account. Every time they receive a gift or earn pay, they can put ten of it in their savings account and allow it to earn interest.
Your child may want to save up for a long-term goal, such as a vacation or a car. Or they can simply put cash away for a rainy day.
Your child can also have their own checking account for taking out money and making payments. These are more liquid and earn less interest. A checking account can help your child to see how easy it is to spend away what they made and teach them some self-control before they get older!
Creating a Budget
One main problem many young adults have is that they don’t know how to budget. As a parent or caregiver, you can provide them with a valuable skill that will make or break them.
Teach your child how to create a simple spreadsheet in which one column is simply a list of all of their income, including paydays and gifts. In the other column, your child can list all of their expenses.
Be sure to include “fixed,” or regular expenses, such as cell phone bills or car insurance payments. You can also have common “discretionary” funds such as clothes or meals out. There should also be a column for what your child plans to save.
This simple exercise can help your child see how easy it is not to spend more than they have. With a little forethought, they can be trained to always think about watching their spending.
As time goes on, you’ll want to talk to your kids about things like investments that can help grow their funds. Resources like the WealthAbility show are a great place to start.
Financial Literacy For Teens
Young adults who are prepared for the expenses life brings have been well-trained in financial principles. With a little financial literacy for teens, they could be on their way toward a promising future.
Don’t stop getting smart about your money now. For more great advice, read our blog today.