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Your kids are never too young to practice smart money management habits, especially as they approach college life and beyond. Here are some tips and resources to help you educate your teen with best practices for managing their money and credit, including preparing for retirement.
Start by encouraging teens to be content with what they have, whether that’s their second-hand car or an earlier cell phone model and help free them from the comparison trap they might feel when seeing what their friends have.
Next remind them they need to figure out how to make their own money, and work experiences provide opportunities to learn how to manage money and ponder possible professional paths.
Since teenagers have free time during school breaks and the summer, help them find a job to learn what it’s like making money for themselves while developing their skills like responsibility and time management. It can even be a confidence boost!
Remember key tools like direct deposit and splitting the deposits to include savings. You can even teach them to become an entrepreneur and help your teen to start up their own business with their own original idea! As long as work isn’t affecting school, a part-time job can be valuable, even if it’s volunteering at a local shelter or other organization in the community.
Give them the responsibility of money management by setting them up with a simple HOMEBANK Student Account and help them budget their personal expenses and any contributions they need to make to the household. The practice of creating a budget is a technique they will be able to use for their personal and professional lives for decades to come.
Teach them not to spend more than they make; there’s an amount of money to spend each month, another for savings, and then recurring expenses to be factored in, such as car payments and insurance or cell phone bills. Transfer an expense or two so it becomes their responsibility, even if you provide the funds and they make the payment.
Motivate them to save, including for their college tuition. Start putting some money away in a savings account for a rainy day immediately, no matter how small the amount. The goal is to have three to six months’ worth of living expenses in a liquid account. Funds over that amount can be strategically invested with your help.
Compound interest can go a long way if your teen starts saving/investing at a young age. If they have a summer job, they can take a portion of their earnings and deposit it into a college savings account. Helping them be accountable for their education might make them focus more on their studies.
When applying for college, it’s important to discuss college financing options. Inform your teen that student loans aren’t the only option to fund their education. Alternatives exist, like going to community college, attending an in-state university, applying for scholarships and even working part-time while in school. Research scholarships and other college funding resources during high school to plan for covering college costs.
Here are some valuable college financing resources.
Teach them the danger of debt and credit cards so they don’t become another credit card victim as soon as they turn 18 and start receiving credit card offers. A credit card can be quite helpful, when traveling for example, but shopping around for the right one and learning the basics of managing a credit card is essential, including practices to prevent identity theft.
Educate your teen on ways to pay bills, such as setting up automatic payments for loans, phone bills, to avoid paying late fees and blemishing their credit history.
Remind them they are in charge and responsible of their own finances and must watch their spending and saving habits. They can save by cutting unnecessary expenses like eating out and attending free events to keep entertainment costs down. Try buying used textbooks instead of new when possible or online for cheaper alternatives and always ask about student discounts.
Be a good example for them by managing expectations of what the family can afford, how you manage your own finances, and setting realistic expectations for the future.
Even though they’re just starting off their career, planning for retirement is never too soon. Teach your young adults about contributing to their employer’s 401 (K) or similar account, especially if there is a company match since that’s basically free money!
Here are some further resources to become more familiar with retirement planning options.
If your children have any questions, let them know they can always turn to you and ask as this is an ongoing learning experience. Talk about your own experiences with money, successes and failures, to help them make better decisions.
Avoid telling them what to do or making negative comments about their decisions but encourage them to think about their options and try to make the best choices, considering price, value, and quality. Remember you are not an unlimited source of funds; if your college student goes beyond their allowance and budget, they can either work for it or you can extend a loan to keep the practice of responsible money management.
Get help from your bank through online, mobile and text banking tools to manage your bank account and have access to balances, bill pay, check deposit, transaction history while also tracking their budget.
