Last updated on July 8th, 2020 at 06:58 pm
Have you had “the talk” with your teens yet? Not the one about the birds and bees — although that one is important, too. No, we mean a conversation about money and how it works.
Money management isn’t a class they can fit in between AP English and biology. Financial advice is usually missing in their high school schedule, so most of what they learn comes from you. It’s crucial you teach them the right things.
Sooner or later, your not-so-little-one will be spreading their wings and leaving the nest. Make sure they’re ready for their first taste of freedom with these tips.
Get Them to Budget
Whether they have a part-time job or simply do chores for an allowance, they’re earning money. Add in birthday presents, holidays, and other bonuses, and they may have some cash set aside.
Seeing as it’s their cash, they can do what they want with it, but it’s a good idea to show them how a budget works. Talk to them about the importance of balancing a budget — not just to make sure they aren’t spending more than they earn, but to ensure they’re hitting all the budget must-haves.
Short- and long-term savings are a part of a balanced budget, so discuss their goals. Do they want to buy a car, save up for college, or go on a school trip? A budget can help make these things happen.
Talk about Credit
Anyone who’s gone through school, bought a house, or experienced an emergency while short on funds understands that savings won’t always be there to help. Sometimes, you have to borrow money in order to afford life’s biggest purchases (like an education) or to handle life’s biggest curveballs (like an unexpected car repair).
You know this, but your child may not. Help them understand. They’ll need to know the basics of borrowing money sooner or later, especially if they intend to go to college.
Sit down with them and discuss the reasons why someone might borrow money, and how interest and other rates applies to personal loans.
While student loans may be their focus, don’t be afraid to include other personal loans in your conversation. Discuss the benefits of installment loans, and compare them to other short term loans like cash advances or payday loans that are also designed for unexpected emergencies.
By discussing the variety of personal loans that are out there and their uses, your teen will be in a better position to choose the right option for their needs when the time comes.
Involve Them at Tax Time
With the tax extension in place, you have some time to prepare your returns. Include your teen when you sit down to file and walk them through what you’re doing.
Even if they don’t have a job yet, they will soon. Teaching them the basics about W-2, W-4s, and 1040s will give them a better understanding of what they’ll have to do in the future.
Nobody likes having “the money talk” but it’s an important lesson your kids need to learn. Once you have it, they’ll be better prepared for the realities of being an adult. Even if that’s several years away, get comfortable talking about it today.
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