With good financial habits not always taught at school, it is up to parents to make sure that their teenagers are equipped to face the world of managing their money.
Teenagers typically have a lot on their minds, however being financially smart generally isn’t one of them. It is important to teach our teenager children money skills so they can make good money decisions that they will use for the rest of their lives.
Eunice Sibiya, head of Consumer Education at FNB shares 5 ways parents can help teach their teenagers good money values.
Create a budget to achieve goals
- Usually pocket money is the first type of money teenagers will manage. Make the most of this and teach teenagers to budget.
- Make your teenager start budgeting from the get-go. They need to understand that they have a finite amount of money which needs to be managed.
- Have they been eyeing an expensive gadget or fashion accessory? Make sure that they understand the cost involved as well as how they can structure their budget to afford to buy it.
- Whatever you do, don’t fall into the trap of just ‘helping’ them out by swiping your credit card or just giving them the money. This will send the wrong message.
Earning money isn’t easy
- Earning money isn’t an easy task, so don’t make it seem easy. Make your teenager earn their pocket money by completing chores around the house and put strict rules in place if they haven’t completed the necessary tasks.
- Parents can even encourage their kids to take a part time job to earn extra cash. This will give them some sense of responsibility as well as understanding of the effort and time that they need to put in to earn an income.
You don’t always spend by using cash
- Make your child aware of all the different caveats of money. They are spending money even if they aren’t physically handing over cash.
- There are many ways to spend money that your teenager may not be aware of. Are they spending hours using data or on their cellphone when they don’t see the bill, or do they expect you to drive them to friend’s houses on the other side of town?
- Everyday actions such as travelling, using water or electricity or data and mobile usage will run up bills that they will never see.
- Make them aware that these are all expenses to you, the parent. If need be, show them the bills that come in at the end of the month.
Saving will always put you in a good position
- Saving should start as soon as you have access to money.
- Give your teenager one golden rule – that is to put away at least 10% of all the money that comes in. Open a savings account for them and encourage them to deposit their money, including pocket money, any birthday money or money earned on part-time jobs into this account.
- Choose an account with favourable interest rates and allow them to access this periodically, but no more than once a quarter. This will teach them discipline of saving and help them to decide when and for what they will be accessing and using money. The money will also steadily grow and soon will reach a reasonable amount to impress any teenager.
- This will demonstrate how compound interest and saving will benefit them in the long run as well as instill the discipline of saving.
Credit where credit is due
- Credit in some form or another is part of everyone’s life and the sooner your teenager understands the advantages and pitfalls of credit, the better.
- Have a sit down with your teenager and quiz their understanding about credit. It is important to highlight all the different types of credit that they will be faced with.
- The easiest way to do this is to list the different credit you use in your own life and demonstrate the difference between your credit card, as well as the interest rate attached against something like your home loan, clothing accounts and other loans.
“Equipping your teenager with skills to manage and understand money will put them on the right track for the rest of their lives,” concludes Sibiya.
