Financial Lessons for Your Teenager
- 2019 1 Feb
Financial Lessons for your Teenager
Teach them the simple 10-10-80 money rule: Whatever “income” they earn, teach your student to save 10%, designate 10% towards a charitable cause of their choice, and to live on the remaining 80%. This simple money rule will cultivate in them the habit of regular saving (which is one of the secrets to long term financial success), to be generous (those who give tend to lead much happier, content lives), and to live within their means.
Delayed Gratification: According to Stanford University research, children who practice delayed gratification have a much greater chance at succeeding in life. You can help your young adult acquire that habit by instituting a 30-day waiting rule on purchases. Any new item will go on a 30-day waiting list. This will help your young adult develop patience, will give him the time to consider “do I really need it?” and will give him room to compare prices and look for bargains or sales.
Budget basics: Have a plan and track it regularly: Sit down with your student and help her put together a simple financial plan (budget). There are great FREE online apps, such as Mvelopes.com, to make this process easy and fun. Mobile, friendly apps with frequent reminders and warnings will help her stay on top of every penny spent or over-spent! Having a written plan is just the beginning. In order for the plan to work you need to measure the plan against the real results. Encourage your student to check their online budget every day in order to make sure that the budget categories and the funds available in the bank account are aligned.
Help them learn from your mistakes: This may not be very comfortable, but granting your young adult an honest look into your finances can teach them much more than you think. If you’ve made mistakes like taking on too much consumer debt, buying more home than you could afford, or allowed spending to get out of control, than you can use those mistakes as great lessons. Take your son or daughter out for dinner and have a great heart to heart conversation. Show them how those mistakes have impacted you in the past or may still be impacting you today.
Investing basics: To help your young adult learn about investing, you can introduce them to simple ideas like opening up a CD or ROTH IRA. Ask your personal banker to explain those two options to your child. You could go as far as giving your son or daughter a specific amount of money and help them start a simple investment account through one of the major investment firms. Once a sum of money is designated, you could ask your child to do some homework on what type of stock or bond they’d like to buy and why. Once invested, both of you could have fun watching the fund grow!
Today's tip brought to you by Mvelopes and Money4Life Coaching.