Your high schooler is fast approaching adulthood. With adulthood comes independence and several responsibilities, including financial ones. For the entirety of his life, your teen has depended upon you for to pay for everything. The only thing that most high schoolers know how to do is spend money. Without the proper knowledge on how to handle their finances, your teen can quickly find himself in deep financial debt. Fortunately, you can help them to understand money and set them up for financial success.
For your teen’s entire life, she has come to you for money. She has more expenses now that she’s older. Rather than continuing to pay for everything she needs, you can encourage your teen (if she’s old enough) to get a part-time job. A job is not only a great opportunity for your teen to earn her own money, it’s also a great opportunity for you to teach her about taxes. Show her what taxes come out at every paycheck and affect her actual take-home pay.
Put Your Teen in Charge
If your child is too young for a regular part-time job (or a part-time job will interfere with school) you can still teach him about managing the money they earn. Provide your child with a set amount of money at set intervals throughout the year. This allows them to pay for the necessities you would otherwise pay for, such as gas and clothing, and teaches them to resist impulse buys.
Whether your teen takes on a part-time job, or you provide him with a “paycheck,” don’t forget to help him set up a bank account. A checking and savings account can help your teen to divide his money into daily spending and saving for a future goal. A teen checking account allows you to make yourself a joint account holder. You have complete access to the account while your teen monitors and manages it.
Teach Them to Pay Themselves First
No matter if your teen gets money from their weekly paycheck, an allowance or a gift, teach your teen to pay herself first. A portion of every check should be put away into their savings account for future use. If she has a specific goal in mind, like a new laptop, it can help her to achieve this goal. Figure out how much she needs as well as when she needs it by. You can then work with her to figure out how much and how often she should be putting money away to achieve her goal.
Help to Develop a Budget
By working with your teen to develop a budget you can help him to be accountable for his spending. Start by writing down a list of his income. Then write down a list of his expenses. Subtract the expenses from the earnings and see what is left over. If the expenses are more than what your teen is earning, help him to solve the problem by prioritizing expenses and figuring out where he can cut back.
Basics of Insurance
If your teen drives a car, it is the perfect chance to teach her about the basics of insurance. Help her to understand the reasons behind insurance. Explain to her that it’s necessary, but it can be extremely useful in the event of an accident by covering the costs that would otherwise be unaffordable. Go over the car insurance policy with her, including the deductibles. It can also be helpful to make her responsible for a portion of the insurance while explaining that the price goes up when accidents occur.
The Costs of College
College is expensive. And many teens are taking out more student loans than they can afford to pay back. Look at different schools with your teen and help him to understand and balance the costs and the benefits. If college is going to be too expensive, there are still ways to get a college degree. Discuss options such as community college. By attending community college, your teen can avoid room and board expenses as well as a meal plan.
Credit Card Smarts
Credit cards can be dangerous for teens. It provides them the ability to whip out the card when they don’t have the cash. This can send them down a deep debt spiral rather quickly while destroying their credit score at the same time. If you decide to allow your teen a credit card, teach her how credit works. Explain how not paying down the balance when the bill arrives results in interest every month. Be sure to explain that by accumulating a balance without paying it back can seriously impact her credit score. And let her know that a bad credit score can negatively affect her chances later in life to get a car loan or a mortgage for a house.
You may want your teen to stay your little one forever, but he is fast growing up. It’s up to you to teach him about money and how it works. By teaching your teen these valuable lessons, you are setting him up to become a successful and independent adult.