Money and finances shouldn’t be in a taboo topic in today’s age, especially when it comes to your discussing it with your children. Having an open and honest conversation about personal finance can help your teen build a foundation of success with growing confidence and knowledge on the topic. Talking to your teen can allow them to have a realistic expectation of the real world, as well as learn from your past mistakes. Here are five ways to help kickstart teaching your teenager about finances:
1. Give them the tools to succeed
It’s estimated that 1 in 5 teens lacks a basic foundation to build on for financial literacy. This can mean that anywhere from 22% of teens do not have the background to do basic things such as build a beginner budget.
In order to offset this statistic, and many other frightening financial literacy statistics for teens, it’s imperative to give them the tools they need to succeed. These tools can often be found in the palm of their hands. There are many financial literacy apps that are designed to help grow your knowledge about money. Some of the apps listed included topics that range from budgeting allowances or job earnings, education lessons, audio lessons, games, and more.
2. Detail the cost of college and other expenses
Is your teen working toward getting into their dream school? Or perhaps needing a vehicle that accompanies their new driver’s license? Take these opportunities to list out expenses that are typically very costly and often require payments. Having your child see how much goes into paying for these types of expenses will better help them grasp the importance of the dollar, budgeting, and long-term goals. Use these types of situations as a learning opportunity to apply for scholarships and grants, save for big expenses, apply for FAFSA, and shop around for low rates on personal loans that can ease the stress of major purchases.
3. The importance of building and maintaining credit
Another important topic is the importance of building and maintaining good credit. By helping your young adult establish their credit history early, they can then access better rates on auto insurance, renting experiences, and various other types of loans.
Set your children up for success early by adding them as an authorized user on your credit card. Authorized user status allows your child to benefit from your good credit history. While it doesn’t have the same credit-building power as a primary user, it’s a great way to start their credit history foundation. Know other signs that show your young adult is credit ready.
4. Implement simple, effective habits
It’s crucial to implement good money habits that include paying bills on time, borrowing the right amount of money, understanding the rate of borrowing, saving, and how accruing late fees can affect their financial journey. Setting good foundational money habits allows your young adult to establish their foreseeable future when it comes to finances.
5. It’s OK to make money mistakes and to learn from others
While we always want the best for our children, it’s important to note that making money mistakes happens from time to time. Children can learn a lot by experiencing the mistakes and avoiding them. Find opportunities that can open the conversation to money management, financial literacy, and ways to improve. Review certain topics together such as debt consolidation, current economic status, or even ways to increase their income. Having real and honest conversations allows for growth and understanding from both parties!
Have more questions or curious on ways to get started helping your young adult on their financial journey? Talk to an Eastex specialist to help guide your family on best practices for financial literacy.