Financial Future for Your Teens
Five Tips to Set Your Teens Financial Future up for Success
At some point in your life you’ve probably heard the saying “money doesn’t grow on trees.” This tends to be difficult for most teenagers to grasp. Their expertise is often limited to one particular aspect, spending it.
Parents play a vital role in financially preparing their children for life on their own. Follow these five tips to help set your kids up for success:
1. Set them up with a savings and a checking account. First things first, help them to open a savings and checking account so they can begin managing their own money. Unity Catholic offers youth accounts. This gives you joint account holder status and access, while your child learns to manage their finances. You may also consider giving them a debit card linked to the checking account. Debit cards give parents access to a record of where money is being spent, and eliminates the need for cash.
2. Put them in charge. Stop buying everything for your kids. Certainly they are going to need money for things like food, activities, and clothes. Instead, set up a spending limit instead. Ensuring that they are responsible for managing their expenses until their next "payday." Doing so will teach them more about living within a budget than they'll ever learn from a book or a lecture.
3. Foster a savings mindset. Whenever kids receive money from jobs, allowances, or gifts, encourage them to pay themselves first. They should put a portion of it into a savings account for future use. If they have a big purchase in mind, help them set a realistic goal for obtaining it. Then work with them to figure out the amount and frequency with which they should put it away to hit their target. Just like adults, teens should learn early to make their money work for them.
4. Discuss the financial expectations of higher education. As the college decision approaches, parents should help teens balance costs and benefits. Most students approach college blindly and wind up with a mountain of debt upon graduation. Consider the field you are entering just as much as you consider the college you want to enroll in. Ideally, students shouldn’t incur more debt than they can afford to repay with their chosen profession. When you consider both sides of the coin, you can better prepare yourself for repayment.
5. Plant a retirement seed. Odds are your sixteen-year-old isn't thinking about that retirement nest. It is the responsibility of the parent or guardian to help them look forward. Understanding that regularly saving for retirement can have a big impact on their future. Teens have the advantage of time. The earlier they start saving, the more time they have to build on that nest egg. And thanks to compound earning, the more money they'll have.
Even parents may think it's too early to start thinking about investing in retirement. However, some companies, such as Starbucks, offer even part-time employees 401(K) benefits. Additional options are opening a Roth IRA through your local credit union. Don't forget, they may be taking care of you someday. No time like the present to get a jump-start on saving!
Teaching your teens about money at any stage is going to take time on your part. It won’t always be easy. At Unity Catholic FCU, we have a number of youth programs available to our members to help guide them towards a successful financial future. We’re here to support our members and their families. If you want your children to know how to successfully manage their money when they get older, taking the time now will be worth it.