Parents play an important role in shaping their kids’ financial behaviour and attitude towards money. Many teenagers rely on their mum and dad to set the right example when it comes to managing finances. Of course, it’s not always easy to talk to teenagers about money, particularly as they approach adulthood. Bearing that in mind, we’ve pinpointed three areas where you can help prepare your kids to navigate the tricky waters of personal finance.
1. Give teenagers financial responsibility
It is important that teenagers recognise the value of money and understand that it is not an unlimited resource.
Giving them the freedom to manage their own budget will teach them valuable lessons about:
Pocket money and budgeting
For many people, pocket money is the first taste of financial responsibility.
Providing your teenager with a regular, set amount of money and the responsibility of paying for something they want gives them their first opportunity to practice how to stay within a budget.
One way to get teenagers to take responsibility for their money is to give them a set budget for a specific task.
This could mean setting your son or daughter a monthly budget for their lunch.
If they take this money and spend it on clothes, or going out, then they’ll learn a valuable lesson when they find themselves stuck having to bring in sandwiches from home.
Part of teaching your teenagers how to manage their finances comes down to being strict with the money you give them and not bailing them out if they overspend.
2. Set the right example
Learning from parents
When it comes to managing finances, many teenagers mimic their parents’ behaviour.
So if you’re the type of person who saves up to buy something, then it’s more likely that your kids will do the same.
If, on the other hand, you’re quick to turn to credit to fund non-essential purchases, your kids are likely to follow in your footsteps.
One way of setting the right example is by including your teenagers in some of your financial decisions, particularly as they reach their late teens.
This could include showing them how you shopped around for a better deal on your current account, or sitting down to work out a monthly budget.
You can take this a step further and send them out to do some grocery shopping with a list and strict budget.
It’s also a good idea to be open with your kids about some of the financial mistakes you made when you were younger.
Sharing your tales of woe can be a good way to highlight the dangers of poor money management.
Whether this means telling them about the time you couldn’t afford to fix the fridge after it broke down, or how not getting your home insured cost you thousands after a burglary.
These are valuable lessons you can share.
Developing a savings habit
Learning about the importance of saving and only buying things which you can afford is an important part of adult life.
Whether this means encouraging your teenagers to put aside a small amount every week to buy new shoes, or longer-term planning for a larger purchase, learning to save is a vital skill.
Without it, your kids might not be able to achieve their long term goals, such as:
It can be difficult to talk to teenagers about the need to save.
However, there are certain opportunities you can seize.
If, for example, your teenager is interested in taking driving lessons, this is a great time to sit down with them and work out how to meet the cost.
This might mean looking at how much needs to be put aside each month, or searching for a part time job.
3. Help them manage their first wage
If your teenager is trying to save up for a large purchase, or simply wants some extra spending money, one option is to find a job.
Getting a job can be a teenager’s first step towards financial independence and can play a key role in preparing them for the future.
If your kid does get a first job, this will often result in an increase in the amount of cash available to them.
This is a great opportunity to put some time aside and talk to them about the importance of saving.
This can be as simple as deciding to put aside a certain sum each month for a rainy day, or, if they have a set goal, helping them make sure they reach it.
For example, if your teenager would like to buy a car, you could show them how to set-up a Teen Saver account to deposit savings into each payday.
This will make saving automatic and make it easier for them to stick to their budget.
You can also help them understand their payslip and talk them through everything they need to know to make sure they’re signed up to the right bank account.
Defence Bank Teen Saver is a great account that has been created specifically for those aged 12-17. They cover both spender and savers, with no fees and a great interest rate for savings.
Find out more about the Teen Saver account here.
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