Good parenting is an unending job that grows to be more important when the child enters the teen years. Teaching these rebellious young ones the importance of financial responsibility is extremely important as the money habits formed at this stage continue for life and help them become financially strong individuals. Here are a few ways that you may use to teach your teenager about financial responsibilities:
- Teach Price Consciousness
It is important to realise the value of things purchased in terms of money paid. Take your teenager for grocery shopping and let him/her pay after calculating the total cost. Let them make the choices while comparing the price difference. This will help them understand the concept of opportunity cost by reminding them where they should spend money.
Work with your kids to set some financial rules and boundaries like set a spending threshold that they cannot exceed without your permission. Let them decide on smaller purchases and expressly guide them on ones that are more expensive. Rather than constricting and controlling how your teenager spends, give them some financial freedom to learn money management.
All sound financial plans start with planning a budget. Ask your child to list all their sources of revenues like allowances or any part-time jobs as well as expenses that may be categorised as essentials and those that may be considered extravagant. Prioritising expenses while putting the essentials first with a focus on savings is the most important part of having a healthy financial plan.
For big purchases, regular savings is must. What better way to teach teenagers about credit than letting them experience the joy of buying expensive items like a mobile or laptop through regular monthly savings. Let them understand the importance of having a good credit history through these purchases. It may be the right time to teach them about credit score and how it may affect long-term credit.
- Stress on Financial Freedom
It is important for your child to understand the dangers of debt-trap and the importance of financial freedom. Examples from acquaintances may help and simple pleasures like going on a holiday without having to worry about where the money would come from can be good teaching moments. Help them understand that financial discipline comes with a reward of achieving personal life goals.
- Introduce the Concept of Investing
Ask your kid to set up financial goals and save smartly to reach them. Help them understand the magic of compounding by showing them Apps that demonstrate the same. Goal tracking mobile applications that show how much money has been saved, interest gained and how much more is still needed are useful to show the importance of investing wisely. Help your child in choosing a fund while explaining the risks associated with it and the returns that can be expected in the future. This will help in inculcating a habit of looking at the risks too and not just returns while investing in the future.
With income, there comes a responsibility towards the community that is fulfilled by paying taxes. For perfect financial responsibility and skills, it is important to make provisions for taxes and develop a healthy attitude of spending wisely and regular savings.
For a lifelong learning in financial matters, it is important to let the child make mistakes and learn from there. Since the amounts involved are small, the consequences are not that big, but the learning that comes from it stays for life. As your child’s biggest mentor, let them experience financial matters first hand assume the role of a guide. Let your child discover how to handle money on their own and gain discipline that will benefit them for life.
