A Pre-College Crash Course On Money For Your Teen

There is a terrible financial reality that most of us are shipped out of the home and put in charge of our own money for the first time with often very little training on how to actually use it responsibly. A lot of parents think that money isn’t the concern of kids but this can come back to bite them in the rear when they send young adults with little understanding of things like credit and no history of building good financial habits. 

If you’re worried that you haven’t yet equipped your kids with the understanding of money that they need, here are a few tips on putting together a crash course for them.

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Budget, budget, budget, and budget

Being responsible with your spending is the first lesson that any student could learn. It can help them avoid the stupid spending mistakes that can all too easily lead to debt and cash flow problems. To budget is to essentially lay out a chart that looks at how much money you have coming in (or currently in your account) and to determine where that money is going to go each week.

Check out a few budget apps such as this Emma review to see the kind of features that can help you better determine how your money is used. You want to set aside as much as you need for your essentials, such as any rent, bills, groceries you have to pay to survive. The rest should be split between your discretionary purchases, as well as financial goals, such as savings or debt repayments.

Making the decision to spend

A lot of people of all ages will spend without a thought. If you see something that you like, your natural impulse is to buy it and you might think that you have the finances to accommodate it. However, outside of essentials and little discretionary purchases, it’s important to make it a habit of considering whether you really need something.

If you know for a fact that you have the money for it, you need to ask if you will make proper use of it and if it’s worth it. If it’s straining your budget, you need to make sure that you genuinely need it, rather than just want it. Even if you do have the money for it, you have to consider if there is anything else that this money can be used for.

After all, delayed gratification can be a very powerful tool to have when it comes to your finances. It’s responsible for opening up the path to savings goals such as putting an investment fund together or having an emergency fund to safeguard against sudden major expenses in the future.

If you want to make sure that you’re aware of how and why you spend, you can use spending tracker tools that allow you to look over your past expenses, comparing them to your planned out budget. This way, you can better see what habits might be getting in the way of your financial responsibility.

 

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Being responsible with credit

When they first get out into college is when most teenagers are going to have their first experience of having credit open to them. Many credit card companies and lenders have special offers for teenagers, opening them a line of credit or adding an overdraft onto their bank account. It can help lend them some financial flexibility and make them better able to cope with sudden major costs. However, having all that credit accessible can be dangerous, as well.

Without a proper understanding of the fact that they will have to pay it back at some point, a lot of students can treat an open line of credit like a free money pot. This can lead to them being in at the very limit and being charged interest, sometimes without them even knowing as such. When that happens, they can get a letter suddenly informing them that they are in debt that they have to pay. A credit card payment calculator can help them get a better idea of the fact that they will very much have to pay back any credit lines that they open. Of course, just as important as how they use their credit is what it’s actually used for.

Why credit matters in the first place

With the tips above, you can help your teenagers get a better idea of why it’s important to monitor their credit use carefully and to only spend it when they really need to or they know they have the capacity to pay it off in the near future. However, aside from the fact that they want to avoid debt, using credit responsibly is important because it helps their future, as well.

You don’t want your teenagers to be afraid of credit cards or overdrafts. The responsible use of credit can help them build a credit history that can be used, in the future, to apply for things like car loans and home loans. This Experia credit report review can be used to help them see how all of their different credit agreements affect their score, and how their score affects their ability to apply for important loans in the future.

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The dangers of debt

We’ve been mentioning it, but it’s worth talking seriously about the dangers of debt. The average person deals with some form of structured debt, such as mortgage repayments, student loans, an open credit card, and so on. However, debt that grows unmanageable can be extremely dangerous to the person holding the debt. 

If they aren’t able to keep up with repayments, they can grow, interest, and fees adding until they can become nigh impossible to repay. At that point, the only remaining option might be bankruptcy, which involves losing all of their assets and being closed off from borrowing in the future due to a severe hit to their credit score. This DTSS review shows several of the consequences of debt, as well as some of the strategies for getting out of it. Most of them involve acting as early as possible against it before it has the opportunity to grow.

The importance of working for money

You might have set aside some money to help your kids get through school and they might take advantage of whatever financial assistance is on offer to them. However, without teaching them the relationship between the work that they do and the money that they have, it’s easy for them to start turning back to relying on the bank of mom & dad, as it’s affectionately called.

A child old enough to start preparing for college is old enough to start a summer job. However, if there are none available, then you might want to look at getting them to do chores for a little extra money. This is best done when they’re at an earlier age, but that isn’t always a reality. The sooner you get them used to working in order to survive, the better.

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You need to keep track of your bills

There are plenty of bills that a student is likely to take on during their first years away from the home. They have their utility bills, such as their energy, water, phone, and internet bills to contend with. However, there are also discretionary bills that they’re increasingly likely to pick up over time.

A lot of the digital services we use nowadays are paid through ongoing subscriptions that, without the proper care, can be very easy to forget. When you start forgetting expenditures, that’s when it becomes much easier for your spending to balloon beyond your budget. It’s recommended that you teach your kids to have a “bills day” once every couple of months when they look over their bank statements to remind themselves of any subscriptions they’re paying for. If there are any that they have genuinely forgotten or not used in the past month, they should stop paying for them.

Never turn your nose up at a good deal

An important part of any student’s life, so long as they’re not getting bankrolled by their parents, is to know how to find a good deal. Your kids will likely become very familiar with various coupon and discount sites, and you should encourage that they do. Similarly, one of the biggest costs that they’re likely to fork out on is the college textbooks that they need. However, websites like Campus Books can help them buy books for much less.

Furthermore, if they need any software to take care of their schoolwork, they should be aware of the fact that there are free alternatives to all kinds of office, visual design, and other software.

With the tips above, you can ensure that your teen isn’t going out without at least an attempt to teach them good finances. How much they stick to these lessons is down to them, but it’s important to at least equip them with the knowledge they need.

Anne

I'm a mother of 2 who likes to get involved in too much! Besides writing here I started a non-profit, I'm on the PTO board, very active in my community and volunteer in the school. I enjoy music, reading, cooking, traveling and spending time with my family. We just adopted our 3rd cat and love them all!

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