This article based on information from the Kasasa Blog, August 2019.
Whether in high school or college, young adults need to understand personal finance as they venture into the “real world.” Growing up means more responsibilities and opportunities for financial growth. These three good money habits for teenagers are great lessons to get them started.
1. Set a Budget
People often hear the word “budget” and think of limitations and missing out on fun. By learning early on that budgets are about being sensible and realistic, teenagers are better equipped to manage their money. It is a great tool to help them stay in control of their life and their spending. Use a spending plan worksheet to teach them the basics. Show them how to keep track of money coming in, bills that need to be paid, and how to plan for emergencies. Most importantly, talk about setting aside cash for hobbies and fun. If you are unfamiliar with budgeting, use this as an opportunity to learn alongside your teenager so you can both gain a better understanding of your money.
2. Beware of Credit Cards
As teenagers turn into legal adults at age 18, credit card companies may begin enticing them with promotional rates and gifts in exchange for their application. If unprepared or unfamiliar with how credit cards work, teenagers can end up with large debts from mismanaging their money. Thirty percent of 2019 college graduates said they were carrying an average of $2,573 in credit card debt. That is why it is important to talk about the benefit of building good credit while avoiding consumer debt. Teach them strategies to keep their balances down so they can be paid off in full each month. Failure to make full payments on time results in interest payments on their balance and can be damaging to their credit.
3. Use Debit Not Credit
Rather than racking up a credit card balance, using a debit card allows you to spend only the money you have. Help your teenager set up a checking account and debit card to start building smart money habits. Look for an account with no monthly fee, a free debit card, and digital tools to maintain access to their account no matter where their future takes them. They can learn to start managing an account and their spending without needing to move accounts as they get older. If they are under 18, a parent or guardian will need to come with them to open the account. If 18 or older, their account can be opened in person or online. Teaching your teen today will help them avoid financial mistakes and provide a strong start in life based on good financial sense.