Raising Financially-Savvy Teenagers

n lieu of complaints that children do not understand the value of money, many parents have begun a campaign to teach their children financial responsibility. In an attempt to help offspring realize that "money does not grow on trees," some parents also hope to achieve a bigger goal. Financially savvy teenagers grow into adults who have a habit of making smart or wise financial decisions. Unfortunately, many young adults incur excessive debts early in life. A bad decision as a young adult may follow them throughout life. Bad credit makes it harder to get an automobile loan, home loan, etc. Although parents are not necessarily to blame for an adult child's bad credit decision. Parents have the power to pave the way for their children. Encouraging financial responsibility and stressing the importance of making wise credit choices will provide a lasting lesson.

Begin Teaching Kids about Money Early

While shopping in a grocery store or retail mall, children have a habit of begging or asking for merchandise. To quiet the begging, many parents simply purchase items. In some households, this becomes a regular routine. However, once a child is old enough to understand the purpose of money, parents should use this as an opportunity to begin teaching children how money works. Instead of giving in to a child's request for items, inform the child that they will be able to purchase items up to a specific dollar amount. Start with a low amount, perhaps $5. Upon entering the store, stick to your guns. If the child requests items over the dollar limit, remind them of the agreement. Essentially, parents are teaching their children a small lesson is budgeting. Adults recognize that is impossible to buy whatever we want. Things cost money, and sometimes, you only have a little money spend.

Offer Weekly Allowances

As children become older, parents may begin offering small weekly allowances. If children enjoy candy or other small toys, their allowances may be used to purchase these items. Parents may establish a fixed amount, or calculate allowances based on behavior and chores. The latter choice is very beneficial. It helps instill work values and good behavior. Parents should avoid giving extra allowance money. Initially, children may spend their entire allowance on one item. However, once they realize that mom and dad will not be giving extra hand-outs, they will likely begin to spend their money more wisely.

Encourage Child to Open a Savings Account

Bicycles, tennis shoes, and other pricey toys are common among older children. Aside from buying gifts for birthdays, Christimas, etc, parents should encourage their child to purchase high ticket items without assistance. Hence, opening a savings account may prove beneficial. With a savings account, children cannot access funds without parental consent. Saving accounts are ideal for birthday money, allowances, report card money, babysitting money, etc. Some children keep piggy banks. However, this makes the money easily accessible. On a whim, children may spend money saved on candy or other needless items. With a savings account, parents can encourage children to stick to their financial goals. Of course, if a child is insistent on spending their money before reaching a goal, parents should allow access to the funds. This could serve as a life lesson. In most cases, children will realize that the decision to spend money prematurely was unwise.

Allow Child to Have a Part-Time Job

Regarding part-time employment, parents must decide according to their child. Some children are able to handle school work and employment. On the other hand, some teenagers cannot maintain acceptable grades while working after school. Part-time employment is ideal for instilling work ethic. Moreover, teenagers are able to fully grasp the concept of working to earn a living. A job will help teenagers learn to appreciate the value of money. While shopping, some teenagers may begin calculating how many work hours it will take to pay for an item. Part-time jobs are perfect for financing mini shopping sprees, school trips, used car, college textbooks, etc.

Carefully Consider Giving Teenagers a Credit Card

Before applying for a credit card on a teenager's behalf, parents should fully inform their children on the importance of using credit responsibly. Credit cards are not free money. Hence, parents should outline consequences for overspending. Still, avoid acquiring a credit card with a large limit. On average, credit limits for new users is approximately $250. The teenager should be responsible for making their own credit card payment. Nonetheless, parents ought to closely monitor the account. If the child is using the account excessively, parents may need to exercise control and revoke credit privileges.