Just as your teen prepares for their drivers’ license, they need to prepare for their financial future. In the same manner that you carefully log their 40 hours of driving, some during the day, some at night, some highway, some city, you should also devote time to preparing your teen to be a financially successful adult. Here are a few strategies that may help.
Take advantage of financial training wheels!
Most children start out with a piggy bank and then hopefully their own savings account. Teaching children that saving is rewarding is best when it becomes a habit started young. (Find a bank that partners with you to show kids that saving is fun and rewarding! Kids’ savings accounts are not all the same.)
As your child hits the teen years, it’s time to involve your child in budgeting for expenditures. Encourage your child to use their allowance or money earned from doing chores or odd jobs to pay for things like dinner with friends or a night out at the movies. This will help your teen get used to tracking their “income” and “expenses”.
Don’t be afraid to open a checking account.
Sometimes parents want to wait until their child is getting ready to start college to open a checking account but then the teen will often be away from home and not able to benefit from your direct guidance. Consider opening a checking account with your teen while they are still in high school.
Explain how checks are used and have them fill out the checks. Explain how ATM/debit cards work to pay for purchases and to access the account at ATMs. Talk about the importance of account security. Discuss not sharing their PIN (personal identification number) or online user IDs and passwords. You can put money into this account to cover school fees, sports expenses, etc., and have your teen be a part of understanding their expenses.
Be a role model and share your experiences.
Remember, it’s not what you say but what you do. Your teen has been observing your driving since they were very young. When teens are learning to drive, most parents become vigilant about maintaining the correct speed and stopping fully at stop signs because they understand they are a role model for their child. The same holds true for finances.
Share what you do and why with your teen. When do you use credit? When is it better to pay cash and why? Explain your thinking to your teen. Open a dialog so they can learn. You’ll be surprised at how they model you.
You’d never let your child get behind the wheel of a car without proper instruction. With a little preparation, you can ensure your child is ready to get on the road to financial success as well.