Our little ones rapidly become young men and women and soon feel they don’t need us anymore. We as parents will worry about the basic essentials for grown kiddos independent living, like housing, eating properly, staying warm, and being careful at night.
Many of us forget to teach them one of the most important lessons of all, financial responsibility, and that’s why I included it in a Year of Teaching Teens Life Skills.
5 Tips for Turning Adolescents into Fiscally Smart Adults
I’ve shared tips for Teaching Teens Money Management and read Make Your Kid a Money Genius and used these 5 tips for turning adolescents into fiscally smart adults from Mark Hansen, financial expert and author of “Success 101 for Teens“. All of them have been helpful as a parent!
“This generation of 20-somethings was raised during an economically-thriving period,” says financial expert Mark Hansen, author of Success 101 for Teens (www.success101forteens.com). “Undisciplined spending habits, student and car loans, and a tough job market have stymied their financial growth. Perhaps the worst culprit is financial ignorance, but we can count this as a lesson for future 20-somethings.”
#1 Saving for Dreams – Three-Envelope Method
Use the first envelope for your day-to-day expenses: gas or lunch money. Pause before blowing this money at the movie theater or a fast-food restaurant!
Envelope No. 2 is for short-term goals. Things like clothing, books, or a new laptop.
The third envelope is for long-term goals. Things like a car, college or a “future millionaire club” fund.
#2 How to Create a Budget
A budget lets us know what’s possible, and not possible, with money. There are six steps to creating a budget.
1. List all of your expenses.
2. List all income.
3. List monthly expenses.
4. Add up these lists separately.
5. Tweak your budget so you can meet your expenses with money left over for savings.
6. Review your budget every week.
#3 How to Set and Follow Through on Goals
First, figure out what your current finances are, then determine what they will be in the future. One year out, then two years out, then four years later, etc.
How will you get to your one- or two-year goal? You need a plan, and most of the time that means either earning more money, spending less, or a combination of the two. Finally, you have to stick to your plan in order for it to work.
#4 Understanding Interest rates
Interest is a fee paid for using someone else’s money. Simple interest is straightforward: 5 percent accrued in your bank account with $100 yields $5 in interest at the end of the year.
Compound interest, however, means ever-increasing amounts. This is crucial to understanding debt you may take on from lenders.
Know what you are borrowing, and the terms thereof. Just as your money can work for you in a bank account, money borrowed can work against you if it is not paid back in a timely manner.
#5 How to Write Checks and Balance Checkbooks
These days, it’s easier than ever to review accounts online, which automatically tracks exchanges. HOWEVER, banks do make mistakes, which is why it’s wise to track your accounts independently.
Ask. Don’t be embarrassed.
Banks are putting a premium on service and want to establish a positive relationship with young customers. If you have a question, speak to someone at the bank. As you take control of your money, you’ll also take control of your life.