As kids age, they need financial guidance, and they need to establish their own financial habits. The teenage years are full of opportunities to spend money, as well as many peer pressure situations that can influence how much teenagers end up saving. Learning and practicing good financial habits as a teenager can set a person up to have a strong and smart financial future; so whether you are a parent looking out for your teen, or a teen trying to navigate the world of money, there are definite habits that can help you (or your teen) secure a solid financial future. This article is directed toward teens, but can also help parents who are hoping to guide their teens toward smart financial choices. Budgeting, saving, and making other wise financial decisions can help encourage strong financial decisions in the future. Below are five financial habits that are ideal to establish during the teen years.
1. Make a budget
The first thing you should do if you want to be financially savvy is to make a budget. If you get an allowance each month, then you should factor that in. If you have a part-time job, you should also factor that in. In your budget you should include anything that your parents expect you to pay for yourself. The term ‘budget’ might seem more appropriate for your parents, but if you want to learn about money, making a budget is the best way to start. Don’t be afraid to ask your parents for help if you need it. Here is a sample budget sheet you can alter to fit your circumstances; obviously, if you are not yet in college, you can take that part of the budget out. Just maintaining a regular monthly budget will help prepare you for your financial future.
2. Allow yourself some freedom
One of the easiest ways to mess up a budget is to never allow yourself any discretionary spending. If you are too hard on yourself in your budget, then you will likely fail because it will be impossible to stick to it. Every month you should allow yourself some money to do what you want, and this includes going to the movies, buying food, buying gifts, or whatever else might come up. Part of the experience of being a teen is to go out and have fun with your friends, so make sure you allow yourself that experience. Establishing a budget is important, but part of being an adult is being able to divide your money so that you determine what is important to you, and if you don’t include money for fun activities, you will start to hate your budget, and you probably won’t keep up with it.
3. Open a bank account
If you open a bank account, you will have an easy and safe way to save money. According to Wyman, you should shop around before you pick a bank. Ask local banks what their savings rates are currently, and determine where you will get the best deal. If you decide to invest your money in a different way, like a CD, then you should also make sure that you compare rates for different CDs. Don’t forget that there are also many online banks you can choose from, which have the advantage of being conveniently available all the time from anywhere if you have a computer, and also you don’t have to wait in line. Determining how much you want to save each month will depend on many factors, including how much money you have coming in and how much you need for your bills. The more you can save now though, the better.
4. Determine what you need and what you want
Obviously, you need a place to sleep, food, water, and so on. You need clothing to wear. However, there are many things that you don’t need. While it’s important to have fun sometimes, you also need to learn to control your spending and not splurge on whatever you want in the moment. Learning this important life lesson will really help you when you become an adult; right now you might not have a lot of bills, but you will when you get older, and failing to learn to control your spending now might set you up for a future of over-spending and credit card debt. Take the time now to make wise financial decisions. Yes, you need clothes; if your parents are only willing to spend so much on a pair of jeans, you need to determine if you would rather pay a little more for the designer pair, or if you should put that money toward something else.
5. Get a job
We’ve discussed how to save your money, but unless you have a job, you may not have a lot of income. Even if your parents give you an allowance, it may not be enough to pay for everything you need, or to leave much left over for savings. Getting a job will also help prepare you for being adult, when you will need to work. Getting a part-time job can also help you become more independent and confident; also, although a job at the local burger joint or the mall might not seem like a pathway to your career, it could be. Just getting out there and working might help you determine what you want to do in the future. Working part-time also looks good on a college application or on future job applications. Lastly, working part-time can help you meet new friends, or even potential people to network with in the future.
6. Learn from your parents
You can and should ask your parents for help with your budget. However, you can learn from your parents in many other ways as well. Although you most likely don’t have a credit card yet, ask your parents to explain to you how their card works. Ask them to explain the difference between debit cards and credit cards, and to share with you why they use each of them and when. If you already know the difference between different types of cards, you can still learn by watching your parents interact with money. Perhaps they have cards that offer rewards points. Perhaps they take out a certain amount of cash each week for discretionary spending, and once it’s gone, they don’t spend anything else. If possible, ask your parents to explain paying bills to you. Even if your parents are uncomfortable sharing the specifics of their finances with you (which would be completely understandable), you can still learn from them just by discussing how each type of savings account, card, and bill works.
Although it’s tempting to spend, spend, spend, when you are a teen, learning and practicing good financial habits now will protect you in the future. Whether you decide to go on to college (where you might have to pay for your own food and utility bills) or to move out of your parents’ house and pay your own bills immediately, you will need these skills in order to become a thriving adult with a strong financial future.