It’s never too early to teach your child the value of money and how to be responsible with it. According to the seventh annual Parents, Kids and Money Survey conducted by T. Rowe Price, eight out of 10 parents feel they are setting a good example for their kids when it comes to finances, but another two-thirds say they’ve likely taken some action that would not be considered a good example. What’s more, a whopping 41 percent of parents say they avoid talking to their children about money.
While discussing finances and things that go hand in hand with them (contracts, terms of use and service agreements) may be boring or uncomfortable, these are topics that are important to educate teens on well before they become adults. Here are some lessons to tech your teenagers:
Live within their means
Managing their finances is one of the biggest challenges teens will face as they become adults. As your teens prepare to enter the world as adults, it’s key to ensure they are as prepared as possible when it comes to yielding good spending (and saving) habits.
Giving your teens some amount of financial responsibility is key. If they have a part-time or summer job, you can require them to use their money to fund the things they want, such as a new iPhone or a portion of the monthly bill, new clothes or car insurance. Though it may not garner loads of excitement, your teens are sure to see the value of these financial responsibilities later in life.
Credit and banking do’s and don’ts
Credit card companies are eager to pounce on teens who are leaving for college, but it can be a slippery slope if they have never had a credit card or are unsure about how they work.
Consider co-signing for a credit card as a way to introduce best practices to them. It is important to closely monitor your teens’ activity and ensure that they earn the funds to pay off the credit card balance each month to avoid interest charges. If you are uncomfortable with getting your teens a credit card, there are prepaid card options that work much like debit cards.
Additionally, you can help your teens learn the essentials of having a bank account by opening one in their names and teaching them how to use a debit card, as well as how to write a check and how to access online banking.
The fine print
It can be tough for anyone, let alone a teenager, to comprehend the details of contracts and agreements. Sharing with your teenagers the difference between a signed contract and a verbal contract can save them from potential hardship in the future.
Contracts that are legally binding should not be taken lightly and should be reviewed with a fine-tooth comb or, in some instances, a lawyer. It is crucial that teens understand the importance of examining the fine print of any contractual agreement as well as understanding the terms of use.
