Financial literacy is the facility to apply skills and knowledge to make wise financial decisions. Gaining these skills and knowledge is an ongoing process that begins in childhood.
Most states don’t have financial literacy requirements in education. It is on the parents and the children themselves to gain the necessary knowledge and skills. Unfortunately, many parents are as uncomfortable discussing money as they are discussing sex. They’re concerned about saying something wrong and not sure where to even start.
These suggestions will make it easier to educate your teenager about money issues:
1. A game can be fun and educational. There are many free games online that teach financial skills. One good example is www.practicalmoneyskills.com/games. It’s a great way to get your budding tycoon off to a good start.
2. Consider part-time employment for your child. It’s beneficial for a teenager to have a job during the summer. Some can handle a part-time job, particularly on the weekends while school is in session. Schoolwork should not suffer due to employment.
? Your child begins to understand that sacrifices have to be made to earn money, even if the only sacrifice might be time.
? Taxes become a lot more real and understandable.
? Your teen also has to learn how to responsibly handle their money.
3. Let them do a budgeting project. If you’re planning a vacation or looking for a cell phone plan, 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. Buying a car is commonly the first major financial event in a teen’s life. With 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 quickly learn about the additional expenses that come with certain purchases. There will be gas, 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. Help them work through the challenge.
5. Credit and debt management are also important. Most adults 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 car or a house. 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.
Teaching your teen to make wise money and financial decisions has a huge effect on their happiness as an adult. Think about how much better off you likely would have been if you had been able to avoid major financial mistakes. Take the time to get your teenager off on the right foot. Start teaching them about personal finances today.