Financial literacy is one of many important topics that isn’t taught in most high schools. That’s why so many people are in debt, and teenagers and adults alike tend to be very irresponsible with money.
Financial independence is not just for teens about to leave the nest. Even during high school and earlier, teenagers need to learn how to make money, save, and budget.
If you want to set up your teenager for success and teach them how to be financially independent, here are some tips that will help.
1) Financial Education Starts Early
Financial literacy should start once a child can count and sight-read numbers. If you start early, you will help your child build good money habits and help them have positive feelings about money so that when your child is a teenager, they can take the next step and learn how to make money and spend it wisely.
If you didn’t start teaching your kid about money until their teen years, it’s not too late. Just start as soon as possible.
2) Give Your Teen an Allowance
By the time your child is a teenager, they should have an allowance. Giving your teen a fixed allowance will help them learn how to budget and save.
Think of it as training wheels before they start making their own money. With an allowance, they can make mistakes and learn from them with little risk. It’s better to accidentally waste $60 instead of $60,000!
3) Set Up a Bank Account
Your teen should have their own bank account so that they learn how to use a debit card, track their expenses, and budget their money. It’s the first step in helping them build a credit history. It will also help them learn about interest and investments.
4) Talk Openly About Money
Money should not be a taboo subject in your home. Be very open with your teenager so they understand and can learn from you. If you have made money mistakes like overspending and bad investments, talk to your teen about what happened so that they can learn from your mistakes.
You should also talk to them about how much you make and how you budget. It will be eye-opening for them to see how much you spend on them every single month. Kids are expensive!
Talking openly about money will help your teenager feel more relaxed about finances and see it as just another part of life rather than something stressful or shameful that no one talks about.
5) Encourage Side Hustles
Opening a lemonade stand may sound corny, but it can teach kids valuable life skills, such as communication, socialization, leadership, problem-solving, innovation, and the ability to make money as their own boss.
Your teen can start tutoring, pet sitting, selling stuff online, being a videographer, dog walking, or even blogging to make some extra cash.
6) Teach Your Teen How to Budget and Save
It’s normal for people who have not been taught financial literacy to overspend and not save. Guiding your teenager on how to budget and save is the most valuable financial skill you can give them.
You can show them how to track their expenses using a debit card or writing it down. At the end of every month, they should build up a habit of reviewing their expenses to see if they’re spending too much money at Starbucks or buying too many clothes.
Help your teen figure out how much they can save every month if they stop buying too many unnecessary things. They should have separate savings and emergency funds so that they can continue these good money habits when they become an adult and are well-prepared for unforeseen expenses.
7) Teach Them to Avoid Debt Like the Plague!
Your teen needs to understand the dangers of debt and how it can impact their future. Teach them about credit, interest rates, and the consequences of taking on too much debt. Encourage them to avoid debt as much as possible.
If they need to take out loans to fund their education or cover other important expenses, show them how to make a plan to pay that off as soon as possible.
You can also teach them the differences between good debt, like low-interest student loans, and bad debt, like high-interest credit cards. Help them understand the long-term impact of debt and the importance of paying it off as soon as possible.
By teaching your teen about debt and its consequences, you can help them make better financial decisions and avoid financial stress in the future.
8) Help Your Teen Understand the Cost of Living
Teenagers don’t realize how much things can add up when we’re going about our daily lives. Talk to your teen about the cost of living in your area and compare that to other places so that they can see how much it costs to exist in our world today.
You can show them the Cost of Living Calculator and have them calculate the cost of living in the different areas they might be interested in moving to after they’re ready to live on their own. Even if they’re still going to be eating all the food in your fridge for a few more years, they still need to be aware of how much it costs to survive on one’s own so that they can prepare for it and appreciate how much they are saving by living with you.
9) Help Them Plan Their Future
If your teen wants to go to a university, they need to know how much that university costs and how to avoid acquiring crippling student debt by going there. Help them make a plan of action where they can avoid taking out loans and can get scholarships and other financial assistance instead.
For teens that want a gap year or more time to figure themselves out, help them look at different options. Make a list of everything needed to go travel around Asia or Europe for a year. There are many volunteer and internship opportunities abroad that can not only provide valuable life and work experience for your teen but also make traveling more affordable.
If your teen wants to get a job, teach them about negotiating salaries and factoring in additional costs like transportation when considering different jobs.
All of the things that your teenager needs to know about being financially independent cannot be covered in one evening. This’s why high schools need to teach this important life skill! But until that happens, you can school your teen at home and make sure that they’re responsible and well-prepared once they’re ready to fly the coop.