Are you thinking about teaching your teen about how money works? You wouldn’t be alone. According to a T. Rowe Price survey, the majority of respondents said they were 15 or old when their parents started discussing financial topics with them.
At fifteen, they’re probably already earning some cash on the side with a part-time job, and they might even be thinking about college. But they’re still young enough that they’re living under your roof without any bills or real responsibilities of their own.
This makes their teen years the perfect time to talk about money, but nevertheless, it can be a hard subject to broach. If you aren’t sure how to start, here are three things you should mention.
The Purpose of Credit
If your teen is thinking about college soon, they may be gearing up to apply for a student loan, and only time will tell when they’ll need an online loan or line of credit.
This is the perfect opportunity to talk about your experiences with student loans, personal loans, or personal line of credit loans that you may have used — or still use today. Talk about why you took them out and how you shopped around for the best rates and terms.
This lesson is easier today than it was when you were a teen. Nowadays, you don’t have to go to a store to shop for rates as you discuss personal loans or line of credit loans. Most financial institutions offer these details on their websites, making it a quick and convenient way to learn.
A future when they may need an online loan may be far away, but it’ll be here sooner than you think. Your kids need to learn about money and credit somewhere. It’s better if they learn it from you than from some source you don’t trust.
The Value of a Budget
Budgeting helps you prioritize your cash in a way that ensures you pay for the necessities first and fun things last.
If they usually get an allowance or have a job, make a budget together while using your own budget as an example. Reflect on how you divvy up your normal salary to cover the family’s needs, while also making sure you have the cash to splurge on something fun.
The Need to Save
You aren’t done with your budget talk until you also touch on savings. A balanced budget will always set aside some cash for a rainy day. Your teen probably already has some idea of how this works if they’ve saved up to buy a phone, video game, or clothes.
But their current savings account is for fun things and planned purchases. As they grow older, they need to know to save up for unexpected emergencies when things go wrong. An emergency fund can help them handle auto bills and home repairs once they’re living on their own.
Here’s a fantastic resource to help you teach the fundamentals about savings to your teen.
Your teen may think they know everything, but they still have a lot to learn about money. So, sit down and teach them. Don’t be afraid to use your finances as an example to get the point across whenever you’re talking about online loans, budgets, and savings.