Remember when you were just a kid? Though your parents gave you just a few ringgits, you were very happy because you got your hands on a certain amount of cash. Seems like most kids nowadays don’t care how much money they get. All they know is that mom and dad can give them another round of cash if they spend all the money in their pockets.
According to CNN, 87% of 12- to 17-year-olds of today hold, on average, some basic know-how on financial management. Still, 87% isn’t 100%. More teens should be taught about the value of money. Listed below are 5 essential reasons why teens—especially if you’ve your own—should be taught about personal finance:
Teach teens how to control their impulses.
Because of raging hormones, most teens cannot control their impulses. If they watch MTV and see Taylor Swift’s cool new sneakers, they’d get it into their heads to buy themselves a pair too. If they go to the mall and see cool pants on sale—they’d definitely try everything just to buy it, or else it’s going to be the end of the world as they know it. Teenage impulsive behaviour seems to bypass rational thinking, which could get them into a lot of financial scrapes.
To help teens learn self-control, tell your kids about the consequences of their impulses and how some of these could lead to bad choices. Teaching your teenage children about personal finance would help them control their impulses better. The more you teach them now, the better prepared they are in the future.
Teach teens how to develop a budget.
Budgeting can be quite hard even for adults, so teaching your teenagers is a good move because they’ll learn how to be financially wise at an early age.
Teens won’t have as much trouble to budget their money because they only have their weekly or monthly allowances to think of. It’ll be easier for them to manage their finances too even if they make mistakes along the way. Creating a budget takes just a bit of effort but teaches lifelong financial lessons to your teens so it’s better for them to learn hard money lessons now than when they already have a too much to lose.
There are different ways to create a budget, such as listing down your budget plan on a piece of paper or on a notebook or using budgeting tools like Excel spreadsheets or those available online. This provides good training for your teens especially if they want to pursue a career in finance or business in the future.
Teach teens to be sensitive to prices.
Teens are used to the fact that their parents pay for almost everything they need or want. It can be an eye-opener for them if you show the prices of their commodities and expenses.
When teens are given fixed allowances, they become more conscious of the things they can afford. To give them a lesson, have your children pay the bills with you a few times when you’re shopping for groceries. This will allow them to see how much you’re paying for food bills because they’ll be required to examine prices and make choices. Also let them help create a budget for the family, so they’ll know how to make one for themselves—when their own time comes.
Teach teens on how to avoid debt.
Keep your teens away from debt. Learning how to spend within limits will teach your teens to manage their personal finances when they’re just starting out on their own.
Give them first-hand lessons about avoiding debt: enrol them in a prepaid debit card program for teens. This type of financial service sets up monthly recurring allowance funds on your children’s prepaid debit cards. Parents, like you, can get alerts and notifications about your kids’ purchase details such as time, price, as well as the remaining balance. This can also help avoid overspending.
Teach them how to save while tracking their expenses. If they already have savings accounts, explain its advantages and disadvantages. Any money they receive from part-time jobs or on holidays can be deposited to their accounts. If they’re about to go to college, let them have their passbook, so they can compare how much money they have saved from the past years up to the present. Tell them that it can help fund their education.
Instead of letting your teenage children buy impulsively, encourage them to think through spending decisions first. Guidance and a practical hands-on approach are important in instructing teenagers about personal finance. Remember that whatever they learn now about saving will be a sure benefit to them in the future—so make sure they learn plenty.
Guest Post by Cristina Beltran, Compare Hero.