Financial responsibility is an important part of adulthood. Those who are financially responsible, are able to live a better quality of life because they live within their means and aren’t drowning under thousands of dollars worth of debt. The key to becoming financially responsible is understanding how to make smart financial decisions and how important financial stability is to your future. It is never too early to start teaching your teen financial responsibility. Let’s take a look at 4 ways you can help your teen become financially savvy.
Open a Checking and Savings Account
Opening a checking account for your teen is an excellent way to teach your teen about financial responsibility. If your teen is a minor you can open a custodial checking account. The account will be in your teen’s name, but you as the parent has control of the account. If your teen is not a minor you can still retain control of the account by opening up a joint account. If you are able to do so, allow your teen to have a debit card. Since debit cards work much like credit cards it’s a great way to introduce your teen to how credit cards work without the risk.
If you haven’t already, open a savings account in your teen’s name. Teach your teen to put a certain amount of their earnings back for a rainy day. Savings should only be touched as a last resort and not as a safety net in the event that your teen decides to overspend.
Give Your Teen a Bill To Pay
Teaching financial responsibility can only be achieved if your teen has some actual responsibility. Bills are not fun, but they are a necessary part of life. Give your teen a small bill to pay each month, such as his phone bill. Whether your teen obtains his spending money from a part-time job or an allowance, paying a bill is important in financial priorities. Your teen will learn that before he spends his money on extracurricular activities, he must make sure he has enough money to pay for his cell phone or else service will get cut off.
Make sure the bill you give your teen is small and manageable. The idea is to encourage financial responsibility. Giving your teen an overwhelming bill will only discourage and instill a sense of hopelessness, which defeats the purpose.
Create a Budget
Budgeting is one of the most important aspects of financial responsibility. Sit down with your teen and help them create a budget and how to stick to it. Often times young adults end up under a mountain of debt because they don’t know how to budget their money. They spend money on extras before their obligations are taken care of and end up overspending.
Build Credit
Helping your teen build credit should be done very carefully as credit cards are of the most popular ways young adults get themselves in trouble with finances. Before opening a credit card in your teen’s name, make sure they first understand the basics of financial responsibility and have demonstrated the ability to handle money responsibly. When choosing a credit card, choose the lowest limit possible. Five-hundred dollars or less is a good limit to aim for. This reduces the temptation for your teen and if your teen does overspend, he won’t be able to rack up thousands of dollars in debt.
Financially responsible teenagers will become financially responsible adults. These adults enjoy a better lifestyle free from the stress of debt they will never be able to pay off. Responsible adults are less likely to need their parents to bail them out financially. Now is the time to begin teaching your teen the ins and outs of finances and set them up for the best future possible.
