The teenage years are important, since this is the time when kids begin to change into young adults. Teaching your teenager about being financially responsible is extremely important since they will need these skills when they go out on their own and have a job and place to live of their own. Here are some helpful tips to better prepare your teenager for their financial life and properly maintain a personal banking account.
Start Saving Early
It's important to teach your teen as soon as possible about the importance of saving. If they have an allowance, set them up with their own checking or savings account where they can start to put money away. If they have a summer job, ask them to put part of their paycheck aside each week and deposit it into their savings account. They'll be surprised to see how fast the money grows, and it teaches them how essential it is to put money away for rainy day emergencies.
Balancing the Checkbook
Understanding the concept of credit and debit is essential to being financially successful. Show your teen how to correctly balance a checkbook, and teach them about how to deduct expenses from their balance. This will help them learn how to prevent overdrafts and it's also a good way to exhibit just how fast money can be spent without realizing it. You can opt to have your teenager use their own debit card, which is a good way to show them real, hands-on account balancing.
Talk About Credit
College students can be easily tempted with credit card offers, so discussing how credit works should be done while your children are in their teenage years. Make sure they understand the importance of having a good credit score and what that can mean for their future. Explain to them that credit cards charge interest rates that can make paying them off much more difficult. The idea of credit is very appealing to younger people, since they might consider it "free money," but if they understand that credit cards have a big impact on their overall financial state, they'll be much more prone to using them with caution.
Keep an Eye on Their Spending
Until your teenager is old enough to leave the home, you should monitor their spending. Make sure they're not overdrawing their accounts, and watch where their money is going. If you see something that concerns you, it's best to address it now so that they understand the impact that spending hard earned money on frivolous things can have. Give them responsibility like paying a small bill every month so they can learn to respect and appreciate the money they've earned.