As a parent, you want nothing but the best for your children, especially when it comes to their future. It’s best to lay foundations that will help them build successful lives for themselves—including healthy money habits and financial literacy.
Your teenagers may think they have a good idea of what money is and what they can do with it, but there should still be some key financial discussions before they leave the nest.
Here are a few financial skills you should teach your teenager to ensure a prosperous future and healthy financial habits.
Teach Your Teen About Investments
As your teens prepare for adulthood, talk to them about investing and compound interest. You can introduce them to stocks, bonds, and IRAS. You could also begin their investment plans by opening high-interest savings accounts they can use to fund small financial goals.
Discuss Good Credit vs. Bad Credit
Discussing debt with your teen is crucial as they move into the next stage of their life. Before they max out their credit card, it’s essential to explain different credit options.
Not all credit is bad. While credit cards come with greater risk, loans are good for developing skills, building wealth over time, or obtaining assets.
Make Small Financial Goals
When teaching your teen financial skills, start with a small financial goal. The most straightforward plan you can make with your teen is a small savings account goal.
Ask them what they’re saving for and let that be their motivator. Be stern in the importance of saving and mandate that 10% of their allowance go to savings before spending money at coffee shops and online stores.
Create a Budget and Stick With It
Budgeting is an effortless financial skill you should teach your teenager. Whether your teen receives an allowance or has a part-time job, you can start teaching them how to budget for expenses. Have them document everything coming in and out to ensure they’re not overspending.
It’s never too early to teach your teenager healthy financial habits. Financial literacy is an essential life skill many don’t learn until it’s too late. Money lessons aren’t about the amount available to you, but about building healthy habits for the future.