Tips & advice on getting your finances back on track.
As a parent, you have the unique ability to positively influence your children’s future financial behaviors by teaching your children how to become financially responsible. If your child enters into adulthood with a clear understanding of money management, the basics of investing and the importance of credit, they are more likely to make financial decisions that will better their financial future and less likely to depend on you for money. The teenage years are a great time for your child to experience real life situations that will help them learn money management skills they can take with them into adulthood.
Here are a few tips to consider to help your teen become more financially responsible:
Encourage them to earn their own money
A part time or summer job is a great way for teenagers to learn the value of money. Encourage financial responsibility by having them use their earned money for things they want or need, rather than depending on you for money. Work with your teen to develop a goal for them to work towards. Perhaps they want to work to save for a car or buy a new pair of shoes for school. You can help them establish a realistic plan and timeline to achieve their goal and check in with them every so often to make sure they stay on track.
Read More: Become Financially Independent- The Basics
Have them open a savings account
A savings account in their name will help motivate your teen to save their money; a habit that will serve them well in adulthood. Whether they have money coming in from a job, allowance or even money they get from family over the holidays, encourage them to put a portion of that money into their savings account and leave it there to build. If they stick with that rule, they will enter adulthood with a cushion already established in case of emergency.
Assign a bill with a due date
Teach your teen the importance of paying bills on time by assigning them a bill with a due date each month. For example, have them be responsible for a portion of their cell phone bill and let them know it is due on the 1st of every month. You can send them a reminder a week before the bill is due, and leave it to them to provide you with the money by the due date. If the bill is late, you can even tack on a late fee. This will help them understand the importance of paying bills on time and that there are consequences when bills are paid late.
Help them establish credit
If your teen is at a point where he/she is maintaining a part time job, has a savings and/or checking account and has shown responsible money management behaviors, consider authorizing them on your credit card. This can help your child begin establishing their credit which will make borrowing easier as they take on more adult responsibilities in the coming years. Remember, authorizing you child on your credit card is risky and can have negative impacts on your debt level and credit score if your child does not understand proper credit use. Educate your teen to understand the pros and cons of credit use along with the costs of interest. Explain that if they use the card, they should only be charging what they can afford to pay back and that they should be paying the full balance each month. If you feel they are not ready to take on such responsibility, you can consider cards that put spending limits on authorized users or a secured credit card.
Lauren Lovett has been with Navicore Solutions for seven years serving as a Certified Credit Counselor and Grant Writer. While in these roles, she has witnessed the positive impact that the organization’s counseling services has on improving the money management skills and economic security of individuals and families in need.