How to Teach Teenagers Good Personal Finance Habits

Upon graduating high school and leaving home, many young adults acquire excessive debts and poor money management skills. In many cases, they weren't taught how to budget and use credit responsibly. Early mistakes make it hard for young adults to buy a home or car. Thus, it is important for parents to teach them good personal finance habits.

Instructions

Difficulty: Moderate

1. Give them an allowance. Children and teenagers constantly beg for money. Rather than oblige every requests, give your child a weekly allowance. Allowances are typically based on completion of household chores and age. Once the child or teenager exceeds their weekly or bi-weekly allowance, they will have to wait until their next payday. This will prepare children for the "real world."
2. Get a part-time job. Some teenagers do not realize how hard it is to earn a buck. Once the child hits 16 or 17-years-old, require them to get a part-time job. The money earned can be used to pay for their clothes, shoes, and entertainment. After working hard for little pay, they'll be more inclined to appreciate the real value of a dollar.
3. Teach them how to budget. Once your child finds a part-time job, show them how to budget their money. Do they have a car payment or transportation costs? Teach them how to create a weekly or monthly budget. Failure to budget properly can result in spending too much money, in which there is little leftover for bills.
4. Give them a credit card. Some young adults get their first credit card in college. In turn, they use credit without considering the consequences. Before your child leaves home, allow them to get a low-limit credit card - perhaps $200. Monitor the credit card, and make sure that your child pays the monthly bill and spends wisely. This way, once the child leaves home and acquires his or her own credit, they are less likely to abuse credit.
5. Show them your monthly bills. Without divulging too much of your personal finances, show your children the monthly household expenses such as the mortgage, power bill, gas bill, car payments, automobile insurance and health insurance. Some teenagers live in a fantasy land, and they do not realize the costs of running a household. As a result, once these young adults move into their own apartment, they suffer from reality shock.