As your children get older and reach their teenage years, money begins to play a more important role in their lives as they seek to become more independent. Many will take a job at the age of 14, perhaps a paper round or a Saturday job doing chores in the neighbourhood as they seek to make money off their own back.
Whilst this should absolutely be encouraged by parents in order to teach your children the world of work, parents must also teach their teenagers the importance of managing the money that they make. To help you out with this, here are six important ways to teach your children personal finance management.
Dealing With Peer Pressure
As kids reach their teenage years there is a lot of pressure on them to keep up with peers both in fashion and their social life. It’s important that your child doesn’t spend their hard-earned money on frivolities just to keep up with the latest trends and you should educate them on the difference between frivolous spending on ‘fads’ and longer term investments when it comes to clothing and products.
It is very important that you teach your teenager how to save cash as early as possible, this will stand them in great stead for the future. Make a savings plan with them and make it visual so that they can see exactly how much money they will be able to save in the next 3, 6 and 12 months, this will inspire them to stick to the plan. A great rule is to save 30% of everything they earn, if they start young then they should continue this in the future.
Setting up a bank account for your child is the a wonderful way to help them manage their money and give them a sense of responsibility. Many banks offer accounts for 14 year olds and up and also offer online ways to manage your account, great for a teenager to keep an eye on their money and their savings. Make sure you involve your child in setting up the account so that they can have full ownership and it’s important that you can view the account as well to make sure they are being responsible.
Whilst you do want your child to have control of their finances, it is important in the early stages to place some rules to help them out, especially on spending. When it comes to spending, a great rule is to say that they can only buy an item when they can afford it twice over, this way they will always have money left. This is just a suggestion to give you an idea, any rules you set in place however, you must be forceful with to ensure that they remain prudent.
It is vital that you teach your kids how to budget, the best way to do this is to sit with them each month and talk about the month ahead. If there are any upcoming events or any items in particular that they wish to buy then you can discuss the best approach in advance. Doing this with your child will help them massively in the future when they have more incomings and outgoings to worry about.
When your child is beginning to manage their finances, it is important that you reward them for being careful with their finances. Of course, this doesn’t happen in adult life, but a financial bonus for them in the early stages will inspire them to practice good money management. Perhaps give them 20% extra on whatever they have saved, or give them some money towards an item that they’ve saved up for. Incentive-based learning is a great method to teach them about caring for their finances and it should pay dividends in the future.