Here’s how you can prepare your teenage child for years of financial wonder and help them avoid money-related pitfalls along the way.
The life of a teenager can be pretty hard. Every time you think you have it all figured out, something comes along and smacks you upside your head and you’re back to square one. Life can certainly be pretty simple, that is, until your first pimple. And then all hell breaks loose.
But cosmetic disasters aside, if you are the parent of a teenager, you are in pole position to make sure his or her wonder years don’t morph into blundering years of financial mismanagement. Sure, a teenager’s life is supposed to be fairly carefree, with only the spectre of mind-numbing periodical exams haunting their very move. However, there’s no reason why teaching them how to manage money shouldn’t be a part of their broader education.
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So, without further ado, let’s delve into the wonderful, and at times, scary world of teenagers and financial management.
Ah, allowances! Known in some cultures as a ‘salary for doing basically nothing’. But, hey, who wouldn’t want handouts while lounging on the couch with a bowl of potato chips on your belly.
However, the question is, do teenagers really need to get an allowance? How does giving them money for doing nothing teach them any sort of financial lesson?
Well, for starters, giving teenagers an allowance helps them understand the value of money, the nuances of budgeting and how to manage their finances better over time. Of course, just giving them money whenever they ask for it won’t teach them anything, which is why it is important to tie-in their allowances with chores or expenses they might have.
For example, allowances can be given only if certain tasks around the house are completed, such as washing the dishes, vacuuming the carpets, mopping the floor, etc. This imparts responsibility, and more importantly teaches children that nothing in life comes free.
Also, let’s say your teenage son or daughter is planning a vacation with their friends (whenever it’s safe to travel again), teaching them to pay for their own holiday expenses (or any other expenses) will show them the importance of saving and budgeting, which will certainly hold them in good stead as they grow older.
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- Financial Literacy
Being literate about money doesn’t just stop at arguing for change from your local auto driver. It’s important for your teenage child to become financially literate at an early age so that he or she isn’t at sixes and sevens when adult life and all the responsibilities that come with it hits them like a ton of bricks.
Educating them about Credit Cards, Personal Loans, Home Loans, etc. as well as interest rates, repayment tenures and all the pros and cons that go with them will go a long way towards ensuring that they make sound financial decisions in future.
This will, in turn, help them manage their money better since they will be able to figure out what works for them and what doesn’t from a financial standpoint.
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- The Power Of Investing
Imparting investment advice to your teenage children could be the best thing you ever do. By opening up a Fixed Deposit or teaching them to invest a part of their monthly allowance in a Mutual Fund scheme, it will ensure that they have something to fall back on when they grow older.
This will also help them understand how they can make their money grow over time, and once they see the returns for themselves, there’s a good chance they would prefer investing any extra money that they might have instead of blowing it up on things that they don’t really need.
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- Debt Education
Teaching teenagers about the perils of accumulated debt could be one of the most important life lessons they ever learn. Considering the fast-paced lifestyle of the world today, teenagers are more prone to racking up debt just to keep up with their friends or peers.
Whether it’s constant borrowing from parents, family or friends, debt can be an enormous buzzkill that could lay waste even to the best laid financial plans. This is exactly why it is important to explain to your teenage child how debt can affect not only their present but their future as well.
Additional Reading: 5 Tips On How To Get Out Of A Debt Trap
So, whether you’re a teenager or a parent of a teenage child reading this, keep these pointers in mind to keep yourself on the right track towards a financially responsible and fruitful future.