Growing up in a family where the discussion of money was the white elephant in the room, I never realized how much or how little we had. I had no appreciation for the naira nor how to be a thrifty shopper. I was ill-prepared to manage a budget or make wise money choices as a college graduate. As I got older and more financially conscious, I realized that if it wasn’t for my minimalist parents, their wise decision to open a kiddies account for my siblings and me, as well as generous relatives with deep pockets, I couldn’t have imagined where we would be today, financially speaking.
Several life lessons opened my eyes to the importance of financial responsibility, which is why I think it’s incredibly important to teach young children how money works and how to wisely use it.
If you ask most teens or kids in their pre-teens what it means to be financially responsible or if they have teens accounts, I am sure you will get a lot of remarks mired in confusion.
This is why I will like to share some practical ideas for imparting financial responsibility in your teenagers, as you prepare them for their future.
How to teach your kids financial responsibility
Having that money talk with your kids as they grow older may be a hard nut to crack. With this in mind, I have curated a checklist to help you prepare your kids as they navigate the tricky waters of personal finance.
Be the example
Several teens rely on their parents to set the right examples when it comes to money management. As parents and guardians, we play a crucial role in shaping our children’s financial habits and attitude towards money.
A great way to set the right example as your teens grow older is by including them in some of your financial decisions, for example, showing them how you get better deals on groceries, or how you use a budget planner for your monthly expenses.
Let them in on your budgeting process for household supplies, essential bills and gradually introduce them to how you sort your taxes or pay your mortgage.
Very often, children mimic the financial habits of their parents or guardians. If your children see you as the type of person who saves up to buy something, then they are more likely to do the same but if they notice you’re quick to turn to credit to fund non-essential purchases, they most likely follow suit.
Give your teens the freedom to manage their own budgets
This will teach a vital lesson and help them understand that money is not an unlimited resource.
Allowing your teens manage funds early will help them recognise the value of money and teach them the importance of spending only what they can afford, and help them avoid the drawbacks caused by unplanned expenses.
You can also introduce them to banks with teen accounts and talk them through everything they need to know to ensure they open the right account.
Pocket money and budgeting
One of the ways to teach teenagers financial responsibility is giving them a set budget for a specific task.
Pocket money offers the first taste of financial responsibility to a lot of children. Giving your kid a regular amount of money and the sole responsibility of paying for things they like, offers them the first glimpse into life and how to stick to a budget.
An example could be providing them with a monthly budget for their meals and allowing them spend the funds as they like; if they choose to spend the money on other things other than their meals and they run out funds, they’d learn a valuable lesson about budgeting and discipline.
Teenagers, who receive regular, fixed sums, are likely to keep track of their financial incomes and spending. A crucial part of teaching your teenagers how to manage their finances is to be strict with the money you give them and ensuring you rarely ever bail them out when they overspend. This will teach them that overspending can lead to the problem of debt.
Share tales of your financial mistakes
Opening up to your kids about certain financial mistakes you have made in the past and how they hindered you is a good idea. These stories are a great way to highlight the dangers of poor financial habits. This could mean telling them about how you incurred debts because of a bad spending habit on unnecessary items.
By sharing some of the financial mistakes you made when you were about their age, you will be teaching them valuable financial lessons.
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Help them Develop a Savings Culture
Teaching your kids, the importance of saving and only buying the things they need is a crucial part of shaping their adult lives.
This could mean encouraging your kids to set aside a small amount every month to buy a new pair of shoes, or teaching them how to save long-term for bigger projects.
This habit and financial discipline will make it easy for them to achieve their long term goals of going to college, paying their mortgage or buying a car as they become adults.
Talking to teenagers about the need to save can be quite tasking, so it’s a great idea to introduce them to saving by leveraging their interests.
If your kid is interested in fashion, you can help them work out how to meet the cost for items they will like to get. This could mean teaching them to set aside a certain amount of money monthly, or helping them secure part-time jobs.
Teach them how to manage their first wage
Helping your teenager secure a job is one of the important steps to financial independence. This will also help increase the amount of disposable income they have access to.
Younger kids who still go to school can take up informal employment like babysitting for family friends, while teenagers over the minimum school leaving age can take up full-time employment. This will play a key role in preparing them for the future and is also a great opportunity to instil in them the importance of saving some of their earnings for rainy days.
An example could be, if your teenager would like to buy some fashion items, makeup or the latest PS4, you can show them how to set-up a standing order to their savings account on every payday. This way, their savings is automated and it so much easier to stick to a budget.
Written by Mariam Barry