Although your teenager may think that they know everything, they still need some advice from mom and dad. As your kids get older and start to earn some money, they have more opportunities to spend it and get themselves into financial trouble as well. Before this happens, teach your teenager a few financial lessons so they can develop the skills needed to manage their money successfully.
Lesson 1: Handling earnings
Encouraging your teen to get a part-time job will allow him or her to have some extra money they can use on expenses. When your teenager begins working, discuss what financial responsibilities will be in their hands. Will they need to help pay car insurance or clothing expenses? Should a portion of their paycheck be saved for college? It is also important to talk to your teenager about taxes. Show them how FICA taxes and regular income taxes work so they understand why a portion is being taken out of their take-home pay.
Lesson 2: Developing a budget
Starting a spending plan can help your teen learn how to balance their money coming in and going out. To start, have them list all sources of income and regular expenses. Subtract the expenses from their income to figure out if their income will meet expenses or if they will need some help. Encourage your teen to think through their spending decisions rather than buying impulsively.
Lesson 3: Saving for the future
If your teenager doesn’t have a savings account, help them open one. Have them identify savings goals to focus on things such as a new car or college. Teaching your child to pay yourself first and put a portion of their income into savings is an important lesson. If you are able, motivate your child to save by offering to match what he or she saves towards a long term goal.
Teaching your kids financial lessons now will help them develop the skills they need to make wise decisions as adults. April is Financial Literacy Month. Use this as an opportunity to teach your kids about what it means to be financially responsible. To set up deposit accounts for your kids or if you have any questions, please contact Sunset Bank and Savings.