Tightwad thinks you are are handicapping your teen if you don't familiarize them with a consumer education and basic money management skills to equip them for their first credit card, their first year living away and being able staying on track with their budget. Tightwad also believes that once they understand how money works they will make better choices in terms of friends with similar priorities, and develop more of a work ethic because they have a plan for their earnings.
As they grow older, most teens insist on planning and running their own lives. Before this happens, parents need to ensure that they have instilled in their kids the ABC's of financial responsibility. Without fiscal jurisprudence, today's Gen Y's quickly run into trouble with car loans, student loans, undisciplined spending habits and a tough job market. Give them the tools they need so that they can control their financial destinies.
Your teen needs to learn how to:
Save Try a three envelope method: The first for day-to-day expenses, the second for short-term goals and the third envelope for long term goals such as a car or college.
Create a budget Budgets set limits. Steps: 1. List all expenses. 2. List all income. 3. List monthly expenses. 4. Add up these lists separately. 5. Tweak the budget to meet your expenses with money left over for savings. 6. Review the budget weekly.
Set and follow through on goals Determine what the current finances are and then determine what they will be in the future in terms of years. How will they be reached? Most likely with a plan to either earn more money, spending less, or a combination of the two. Finally, a plan must be adhered to to reach the goal.
Understand interest rates, such as credit cards Interest is a fee paid for using someone else’s money. Simple interest is straightforward: 5% accrued in a bank account with $100 yields $5 in interest at the end of the year. Compound interest, however, means ever-increasing amounts. This is crucial to understanding debt a person may take on from lenders. Understand the lending terms for money borrowed. Just as money can work for you in a bank account, money borrowed can work against you if not paid back in a timely manner.
Write cheques and balance a chequebook It's easy to review accounts online, which automatically tracks exchanges. But, it’s wise to track personal accounts independently to see where money goes and be able to account for it.
By teaching your teen these financial life skills you are giving them the tools for the next step in their lives as they fly out of your nest and into one of their own.
Save Try a three envelope method: The first for day-to-day expenses, the second for short-term goals and the third envelope for long term goals such as a car or college.
Create a budget Budgets set limits. Steps: 1. List all expenses. 2. List all income. 3. List monthly expenses. 4. Add up these lists separately. 5. Tweak the budget to meet your expenses with money left over for savings. 6. Review the budget weekly.
Set and follow through on goals Determine what the current finances are and then determine what they will be in the future in terms of years. How will they be reached? Most likely with a plan to either earn more money, spending less, or a combination of the two. Finally, a plan must be adhered to to reach the goal.
Understand interest rates, such as credit cards Interest is a fee paid for using someone else’s money. Simple interest is straightforward: 5% accrued in a bank account with $100 yields $5 in interest at the end of the year. Compound interest, however, means ever-increasing amounts. This is crucial to understanding debt a person may take on from lenders. Understand the lending terms for money borrowed. Just as money can work for you in a bank account, money borrowed can work against you if not paid back in a timely manner.
Write cheques and balance a chequebook It's easy to review accounts online, which automatically tracks exchanges. But, it’s wise to track personal accounts independently to see where money goes and be able to account for it.
By teaching your teen these financial life skills you are giving them the tools for the next step in their lives as they fly out of your nest and into one of their own.
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