A lot of adults around the world are in debt and a lot of it, unfortunately, has to do with bad spending habits. Now that paying through credit cards is increasingly becoming the norm, some tend to overspend and end up accumulating debt that they cannot pay.
Teaching financial literacy as early as possible will create positive spending habits in their adulthood. It will enable them to buy affordable housing in prime locations, a nice car, and have a life that is free from the stress of overwhelming debt.
Here is how to talk to your teenagers about money.
Create a Budget
Kids never had to worry about budgeting. In case they run out of money for the week, their parents always have their back. They can always ask for more to buy a toy or a sweet treat. However, at some point in their life, they have to stand on their own. You would not want them to live from paycheck to paycheck.
Begin by instructing your teen to track their own expenses. They have to be aware of where their money is going. As soon as they get their allowance for the week or month, allow them to budget their expenses on their own. Make sure that they are designating an amount for savings, too.
Open a Savings Account
Now, the money that they will be able to save from their allowance should go on their own savings account. Help them set up their own savings account because it might help motivate them to see their money grow month after month.
Do not discourage them from withdrawing money from it. They should be responsible for their savings account. They should have the freedom to decide whether to add or take out their own money.
Your teen will also learn about how to take advantage of the various services or perks that banks offer to their members. It would help them navigate banking in the future.
Discuss Wants vs. Needs
Teenagers are under pressure to conform to the interests and styles of their peers. Often, they think that they have to have the latest devices and the most popular brands to be on-trend.
They should be able to tell whether an item is a want or a need. They may think that they absolutely need a $300 pair of sports shoes, but there might be a much affordable and equally comfortable option that they can buy.
It should be clear what items fall in the need category and which products can be categorized as wants.
Involve Them in Household Tasks
One other lesson that teenagers need to learn is how much it costs for you to run a household. Take them to grocery runs, ask them to sit with you as you open your monthly utility bills, and show them how you create the budget for the entire household.
This will make them realize that everything comes at a cost. It will also instill the necessity of living within their means.
Of course, none of these tips would be effective if you, the parent, do not follow them. Your children look to you for guidance. If they see you wasting your money on items that you do not need and going into debt, they likely would inherit your bad spending habits. Set a good example.