Financial Adulting Made Simple
Five easy ways to set up your children for future success with money
Handling finances isn’t an inherent skill, yet just 28 states require students to take a personal finance course before graduating from high school.
If you want your teens to know how to manage money responsibly as adults, here are five steps you can take now to help them learn the ropes of saving, budgeting and paying bills.
1. Open a checking and savings account
Opening a joint checking and savings account with your teens is a good starting point. This introduces them to concepts of direct deposits, withdrawals and interest. Whether they’re age 12 or 17, encourage them to set savings goals and regularly deposit a portion of their allowance or earnings into their savings account.
2. Teach budgeting
Teaching your kids how to budget will give them an early understanding of income versus expenses on a smaller scale. Help them break down expenses into categories by creating a spreadsheet of earnings and expenses, or download a money management app so they understand where their money is going each month, and let them set goals for a specific financial milestone, whether it’s buying a new smartphone or a car.
3. Introduce a debit card
While cash is a good introduction for teaching your child about money, so is opening a debit card in their name. They’ll need to become familiar with online and in-store transactions. Many banks offer teen-friendly debit card options with built-in controls that allow parents to monitor spending and set limits. A debit card also gives your child a safe way to start making purchases without having to carry cash.
4. Help them establish credit history
Even if your teen doesn’t have a credit card, consider adding them as an authorized user on your personal card if they’re over the age of 13. This enables them to begin building credit without incurring the responsibility of making payments. It also offers a teachable moment on the importance of paying bills on time and maintaining a good credit score. Teens can get their own credit card at age 18, assuming they meet the card issuer’s requirements.
5. Encourage them to earn their own money
Teens can start to dip their toes in the job pool, whether formally or informally, by earning their own money. Whether it’s extra chores around the house, a part-time job at a local retail store or babysitting a neighbor’s kids, making their own money can help them better understand and appreciate its value.
Taking these steps when your child is in their early teens not only teaches them how to manage their finances but will also help set them up for financial independence once they’re on their own.