Teaching our teenagers about money can be both rewarding and intimidating. There will be plenty of times that they may not understand what you mean, but your teachings play a vital role in their self-development, as money plays such a big part in their lives. To help you in guiding your teens, here are some factors you may want to consider.
A considerable percentage of teens in Canada do not have a clear concept of how they should be saving their money or how to set long-term financial goals. To teach them the concept of savings, start with the basics and talk to them them about your household budget. Educating them on the reality of managing family finances will help your teen absorb the idea of compound interest, important savings, and delaying gratification for more important things. Teach your teens how to allocate their funds for their expenses, charity, investments, and savings with every dollar that they earn.
For example, my 13-year-old has attended a girls’ summer camp every year since she was nine. The first year, we paid for the camp for her. The second year, she began paying for the camp herself with her Christmas and birthday money. When she started babysitting, we suggested that she save her money towards camp. Having a specific goal—a big summer camp that she really wanted to attend—helped her to put that money in the instead of spending it on candy or smaller purchases.
You may also want to teach your teen to follow the 50/30/20 rule, where 50% of their earnings goes to the essentials, 30% towards their personal spending, and 20% will go to their savings. This rule is an easy guideline for teens to follow.
Allowing your teens to have their own credit card can be scary, but you are helping them to learn how to be responsible in how to use them. You can begin with a teen-friendly credit card that comes with a low amount in a spending limit. A secured credit card for your teen can also be a great idea because it requires a security deposit to use the card, which will be the credit limit. Here are some examples of credit cards that your teens can use.
An Apple Card is ideal for older teens, as it is not a physical card, but rather a digital one stored on their iPhones. This means there will be no chance to misplace it like an ordinary plastic card. The Apple Card has a natural design, and its customer service is accessible through iMessage. They can send weekly and monthly updates of their account.
Journey Student Rewards From Capital One
This card offers a $0 annual fee for students, which is excellent for those who are just starting to build a good credit history.
Discover it Secured Credit Card
Discover it Secured Credit Card is one of the most popular cards for people building a good credit history. It features no fees and gives bonuses, or you can earn cash back.
Money Management Apps
It may feel overwhelming to see countless apps available for teaching teenagers about money or supporting them in handling their money. To choose the best app for your teen, ask them if they are interested in using it for their savings. It is best to know if your teen will use the app consistently and effectively to help them learn how to manage their savings.
It can be hard for kids to understand what money they have when we live in a largely cashless society now. For example, most of Sunshine’s babysitting money goes into a kids’ bank account attached to mine. Many of her babysitting clients pay her via e-transfer. It’s better than her having wads of cash in the house (as cash can get lost), but she has to ask me how much money she has in her account.
Sitting down weekly with your child to look at the earning and spending may be a good idea. When I do my account, I can invite Sunshine over to take a quick look at her accounting. You can also use apps to teach your kids about personal finance. If your child doesn’t have an income such as babysitting, then an allowance may be a good way to help them learn about money. Apps can help you manage their allowance or let them earn money through doing household chores.
Talk to Your Teenager
Having an open and honest conversation with your teen is imperative to make them understand and appreciate your intentions. There are plenty of topics that you can discuss with your teenager, and some of them may be uncomfortable, but these conversations are essential, especially when teaching them about handling their finances. Preparing them for their future also means showing them where to get support whenever needed, such as looking for funding for Ontario residents who need assistance with their financial needs.
Money management should start early so there’s minimal risk for your children to make financial mistakes. Follow our tips, and raise a financially-empowered child!
What has helped you teach your teenagers about money? What do you wish you knew about handling money when you were a teen or young adult?