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Kids grow up fast. Out of nowhere, your little boy is looking down at you because he is inches taller than you. Your little girl is not riding her pink bike, instead, she is driving your car. It is time to make sure your teen will make it out in the world as she goes off to college. It is time to open your teen’s eyes about money and teach your teen about finances. There are many teen money lessons that all teens need to know before going off to university.
1. How to Budget
Money won’t just come from the money tree (mom and dad) moving forward. This might be the most important lesson of all the teen money lessons! It is time to teach your teen to budget to zero and understand all the expenses she is responsible for while in college.
Staying on a budget will require your teen to start planning their expenses and income. Budgeting will highlight the difference between wants and needs.
2. Learn to Meal Plan and Cook
Unless your teen is on a college meal plan, the first real test for budgeting is spending money on food. Eating out is crazy expensive and unhealthy. Shopping at the grocery store can be overwhelming.
Meal planning and having a grocery list can greatly reduce his spending on food. Also, make sure he gets the loyalty card for the grocery store. It will keep him on his food budget.
Remember, he will probably need a few recipes from you and practice at home before making his first masterpiece.
3. Bargain Hunting Skills
This is an easy money lesson for some. It is time to remember how it was to have no money when you were in college. Take your teen to thrift stores and teach her how to bargain hunt.
Additionally, make sure she joins the reward (loyalty) clubs (and uses the app) for where she might shop like the local drug store.
This might seem very easy for adults, but we had to learn it from someone or by trial and error.
4. Check Account and Debit Cards
Getting back to budgeting, teens must know how much money is in their checking account. Keeping updated on the balance will prevent overdraft fees and other problems.
Additionally, a good money lesson is debit cards immediately take money directly from his checking account regardless of where the card is used – ATM or at a store.
Not that cash is used often, but your kid should never pay to use an ATM.
Get your teenager a checking account and debit card before college will give him experience in managing his own money.
5. Credit Cards
When you turn 18 years old, you can get credit cards without your parents’ signing off, so freedom. The credit card companies take advantage of this freedom and offer tons of credit cards targeting college students. This is a potential slippery slope.
Many college students do not manage their money and think credit cards are easy money. They just get more credit cards until they are up to their eyeballs in debt and are paying 20%+ interest on their purchases.
Warn your kids about the dangers of credit cards and discourage them from applying for credit cards in college.
There is no “free money” for applying and they will not earn enough money in college to justify having a bunch of credit cards.
College students get themselves in a lot of credit card debt by not paying attention to their spending. Protect and educate your teenager, so he is not a victim.
6. Get a Job
Teenagers learn a lot of good skills from having those low paying summer jobs. It is important to learn communication skills, respecting managers, showing up on time, work as a team member, and so on. These skills will be critical for success in college.
Additionally, having a crummy summer job can help motivate a student to do better in college. Finally, the summer job helps your teen understand the importance of selecting and staying in a good major. A small paycheck can be very motivating, especially after taxes are taken out.
7. Start Saving
Teens need to understand that now is the time to start saving. Have your teen start a Roth IRA with some of their summer job money. A Roth IRA can be opened with less than $100.
If parents or grandparents have the financial means, it can help to match the savings to give more of an incentive.
Going through the process of setting up a Roth IRA or just a savings account is a good experience for a teenager. The whole process can be intimidating.
Financial institutions, like Fidelity, will meet with anyone opening a Roth IRA and help select the right fund for the teenager.
Just do your own homework. Remember financial advisors are selling a product.
Learning to deal with money is an important life lesson. There are too many people in their 20’s and 30’s saying that they wish someone had taught them about finance. Their lack of knowledge led to having significant debt to address.
No one wants to be living in their parent’s house during their 20’s.
Teenagers that are planning for their financial future are exponentially increasing their success probability.
As a recap, the 7 Teen Money Lessons:
- Learn to Budget
- Meal Planning and Being Able to Cook
- Bargain Hunting Skills
- Managing a Checking Account and Debit Card
- Understanding the Dangers of Credit Cards
- Get a Job
- Start Saving
Below are some additional great reads including an article on how to pay for college that we recommend.
Good Luck, WhipperSnapper Finance