There are many responsibilities that come with being an adult. One of those is budgeting, keeping track of our money. Teaching our teens money tips is a great step towards helping to prepare them for how to handle their money one day. This post talks about 4 money tips to teach your teens for the future. It is intended for those who want to teach their children how to be responsible when it comes to handling money.
These are some of the tips I feel are very important to teach. I am not a financial expert, but I am a mom of two teenagers myself and feel that these tips are a great start to teaching our teens about money and their futures.
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Why we should teach teens about money
When it comes to teaching teens about money, there are a lot of important lessons that can be taught. It is never too early or late for your child to start learning about money and its value.
When you teach teens about money, they may be more likely to have a healthy relationship with it. They may also be less likely to spend their money on impulse purchases or other things that do not bring them long-term happiness. We all want our children to have a bright future and be successful, so it's important that they are well-informed on the topic of finance at an early age.
4 Money tips to teach your teens for the future
Tip 1: The importance of an emergency fund.
One of the most valuable lessons that teenagers can learn is the importance of an emergency fund. This will help them during their first few years out on their own and after. Things can come up such as if they need something major fixed in their home or car.
Sometimes people regardless of how old they are, do not realize the importance of an emergency fund until they need one. We may think that having a very small amount of money set aside will be enough, or that the chances of needing the money are small. In fact, unfortunately we do not know if we may need it. So, it is best to prepare and have one in case there ever is an emergency.
Examples to save for:
- Car repairs
Things come up with our vehicles that need to be addressed. Some of these things may include new tires, a new part for the vehicle, and also regular maintenance such as oil changes. To help keep our vehicles running well, we need to be able to purchase these types of items.
- Having to miss work
If you are not able to go to work due to illness for example, and are not being paid during that time, it is important to have money saved. You will need to be able to buy food and pay your bills still.
- Unexpected bills
Unexpected bills can come up. If you do not have some money set aside for them, it can really take a toll on your budget. Some unexpected bills may include doctor bills and home repairs such as needing a new air conditioner or furnace. These things can become quite expensive.
Tip 2: Paying yourself first.
It is important to teach teens about paying yourself first and what that means exactly. We want to help them to not only know the importance of having a savings for now but also to have savings for the future as well. If one day they would like to retire, they will still need money to live on. Saving now and throughout the years can help them achieve that.
Listed below are a couple of examples of paying yourself first in regard to retirement:
- 401 (k) plan
You may be eligible for a 401 (k) if your employer offers it. You may have to work a certain number of hours per week to be able to be eligible for it for example. You are able to add money to it without that money being taxed. Sometimes some employers will match up to a certain amount that you contribute. Which in turn allows you to save even more. Be sure to find out all of the details and any possible fees or penalties for any reason.
- Traditional IRA
A traditional Ira for retirement allows individuals that work and make money to add to it, and that is not taxable income. You will invest the money on your own and it will not be taxed until retirement when you withdraw it. Again, be sure to find out all of the details and any possible fees or penalties for any reason.
Tip 3: Credit cards
The first time you are able to apply for a credit card can be exciting. Even if you have every intention of paying your bill in full each month, it can still be difficult to do if we are not careful.
It is important to teach teens that although they do not have to pay the credit card bill at the time, they should still make sure that they will have money to pay for it when it is due to pay.
- Fees
Credit cards can have a very high interest rate. If we do not pay off our balance each month, fees will be tacked on. If we pay our credit card late, fees will be tacked on. It is important to ask ourselves, regardless of how old we are, if we have the cash why not pay for it in cash? If we do not have cash perhaps not buying it at all?
- Paying more than you thought
An item that we thought we were getting a good deal on, may not end up being such a good deal after all. For example, if we pay our bill late, we will then have the late fee tacked onto it. If we do not pay the item in full by the due date, we will have interest tacked onto it.
Tip 4: Loans
With the cost of college education on the rise, that is another reason why it is important to teach our teens about money. One way we can do this is by helping them understand loans and their costs. But it is important that teens know that there are fees included in loans. So, it is important to read all the information before getting a loan and knowing everything that you will be paying for. We want them to know that there are many different factors involved in borrowing money like interest rates, loan fees, monthly payments, etc.
- An idea is to possibly make an appointment with someone that works with loans. Asking them if they could sit down with you and your teen and go over the details of different loans and what all they entail.
Conclusion
Teaching our teenagers money tips is an important part of preparing them for their future. Taking some time to talk with them about things such as the importance of having an emergency fund, paying yourself first and learning as much about credit cards and loans as possible, can help them to grow their knowledge in these areas.
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