Before you know it, your four-year-old has grown into a sixteen-year-old who is only a couple years away from adulthood. Now, more than ever, is the time to talk to your teen about personal finance. Our financial habits are often influenced by how our parents dealt with money. So, if your parents had a healthy relationship with money, the chances are high that you do as well. However, the opposite can also be true.
You need to talk about healthy personal finance habits with your teenagers, especially during this coronavirus pandemic. From preparing for college to managing credit cards and student loans, you want to make sure your teenager is set up for success. Your guidance can help them avoid some of the money mistakes most of us make as we become adults.
How can you begin and guide this dialogue? Take a look at the tips below.
Acknowledge This New Season of Uncertainty
Address the elephant in the room. The coronavirus pandemic will continue to define how we make financial decisions. Therefore, you must be honest with your teenagers about the impact of this event. Discuss the effect it’s having on jobs, personal finance, and the economy. You don’t want to scare your children, but you do want them to understand the new issues prompted by this crisis.
Answer Their Questions
While it’s vital to teach your children good financial habits, you also want to listen. Children often know more than we think they do. Therefore, open the floor and allow for a two-way dialogue and invite them to ask questions about money management. You can also instigate conversation by presenting various personal finance situations. Then, ask them how they would overcome them. It helps to see what they know, so make sure you are making space to listen.
Talk About Saving
Saving is a critical personal finance skill, but it’s a habit that many of us didn’t pick up at an early age. How many of you wish you started saving at 20, 25, or even 30? Use these talks to emphasize how important it is—especially now—to save. Use real-world examples of why this skill is essential. Discuss the costs they will have to manage as an adult, and why saving is the best way to put themselves in a position to be successful. Highlight things like the 50/30/20 budgeting rule and have them calculate the money they can have in two to five years if they start saving now.
Walk Them Through a Budget
As you discuss saving, you should also teach your teenager about budgeting. A survey by credit.com revealed that almost 30 percent of respondents don’t have a budget or feel they need one. Budgeting can prevent overspending and encourage saving. Therefore, you want to teach your teenager how to create a thorough budget. Additionally, you should discuss how to stick to a budget. Today’s younger generations are tech-savvy, so introducing them to apps that help them track their spending can help them maintain a budget.
Discuss The Ins and Outs of Debt
Crises like the COVID-19 pandemic make managing debt even more crucial. Thus, you must teach your teenagers about the importance of being debt-free during, and even after, an economic crisis. Discuss credit cards, student loans, and interest rates. Also, touch on how large amounts of debt can keep them from achieving their financial goals. Additionally, discuss credit score and how it impacts their opportunity to purchase homes and cars, as well as their job prospects. The goal is to help them understand how debt can prevent them from realizing financial freedom.
Financial Conversations Will Help Your Teenager Navigate This New Normal
Everything is changing as a result of this pandemic, especially with regards to finances. You want to make sure that your teenager can handle a world where the job outlook is unsteady, and costs like student loans continue to climb.
Since they don’t teach personal finance in schools, you may be the only person to give them this information. Helping them develop strong personal finance skills will allow them to set their own financial goals and build strategies to achieve them.
For more information on teaching your children about personal finance, read: How to Start a Conversation About Money with Your Children.