When your child is financially literate, it basically means your child has the knowledge and understanding of financial matters – how money works in the world and so is able to make wise financial decisions.
As a mother of two teenage daughters and a 12 year old (well, “…almost a teenager.” as she always remind me!), I often wonder how their generation will cope in the future with the state of global economy now. I’m sure you’ll agree with me that it’s tougher now than when we were growing up. For example, buying your first house now is almost impossible unless you have rich parents to help you out.
Having said that, even in this tough economic climate, many are thriving mainly because most are more financially literate and know how to benefit from crisis! Teaching your teenager to be financially savvy is an on-going process that starts off in childhood. When you teach them money matters, they’ll know how to make money work for them and not the other way round!
When I was growing up, there were no financial literacy requirements in education; it just wasn’t in our school or college curriculum. Although, some education establishments are now beginning to touch on financial related topics in schools. However, it is on the parents and the children themselves to gain the necessary knowledge and skills in order to ensure they are walking towards a brighter future where they are not slaves to money.
Unfortunately, many parents are as uncomfortable discussing money just as they are discussing sex. Principally because they themselves had to learn from their mistakes and so the idea of empowering their children to be financial literate just never crossed their minds. While some are concerned about saying something wrong and not sure where to even start.
You see, as I mentioned earlier, our children are now living in tougher times with so many things grabbing their attentions and stealing their times. If you as a parent or guardian don’t guide them towards becoming financial savvy, they will end up making even bigger mistakes than you ever made.
Below are some very useful strategies will assist you in educating your teenager about money issues.
1. Playing Games
I know there are so many games out there but there are quite a number of games that are fun and educational. There are many free games online that teach financial skills. One good example is www.practicalmoneyskills.com/games . It’s actually a powerful way to get your budding tycoon off to an excellent start.
2. Part-Time Employment
Consider your child taking up a part-time job. It’s beneficial for a teenager to have a job especially during the summer holidays. Some may be able to handle a part-time job, particularly on the weekends while the school is in session. Schoolwork should not suffer due to employment!
- As your child begins to earn their own money, they will begin to understand that sacrifices have to be made to earn money, even when the only sacrifice is time. Just imagine your teenage child waking up earlier to go to work! I giggle (with pride!) each time I see my daughters leave the house for work.
- Paying taxes will develop into a much more real and understandable act of responsibility.
- Your teen also has to learn how to responsibly handle their money. It gives them opportunity to plan how to spend their money.
3. Cash Management
Allow them to execute a budgeting project. If you’re planning a vacation or looking to buy your next mobile phone, it might be a great opportunity to let your teenager do some research and present the findings to you. They’ll learn a lot, and you’ll get a break!
- Give your child some parameters and provide helpful feedback on their work.
4. First Major Financial Commitment
Buying a car is commonly the first major financial event in a teen’s life. With you or another close adult relative as a co-signer, your child should be able to get his first loan. This is a great opportunity to create a positive credit history.
- They will also learn quickly about the additional expenses that come with certain purchases. There will be fuel, insurance, maintenance, repairs, registration, and so on. It’s all these related expenses that must be considered when deciding if a major purchase makes financial sense.
- Be hesitant to bail your child out if they struggle one month to meet their financial obligations. Rather than saving the day, help them work through the challenge.
5. Credit and Debt Management
Credit and debt management are also important. Most adults (including yours truly!) wish they had done a much better job avoiding debt issues earlier in life. Credit is about being able to borrow money. Debt management is about being able make good decisions about how much to borrow and paying it back reliably.
- Teach your teen about credit scores and what determines a credit score. Explain how their credit score affects their ability to borrow money to buy a house or a car. It also affects their insurance rates and interest rates on loans.
- Adding your child as an authorized user to your credit card will help them build credit. Pre-paid credit cards are another option. They might be able to get their own credit card when they’re 18. Just because your child is 18 doesn’t mean they’re ready or well equipped to handle credit cards.
Teaching your teen to make wise money and financial decisions has a huge effect on their happiness as an adult. Consider just how much happier you could have been if you’d been in a position to prevent key financial mistakes. Make time to get your teenager off on the right foot. Start teaching them about personal finances.