A huge percentage of millennials are treating their money like it’s the most important thing in the world to them, and they’re doing it because they grew up suffering under their parents’ foreclosures and stock market losses.
It’s a great example of the effect you can have on your own teenagers if you start teaching them money management skills now. Despite outward appearances, they are listening to you, and they’re still impressionable enough that you probably won’t need real-life financial tragedies to make an impact.
Lesson 1: Life Costs Money
Most teens already understand that they’ll need a job to buy a house and a car. However, do they also know about the additional expenses that pop up, such as utilities, auto insurance Newark DE, groceries and every other part of daily life that isn’t free? Invite your teen to pay bills with you; they might better appreciate the eventuality of spending an entire paycheck on the cost of survival.
Lesson 2: The IRS Is Paid First
Speaking of paychecks, do you remember the first time you realized that a $50,000 salary was, in fact, much less? When your teen comes home after getting paid for his or her part-time job, go over the check stub and explain the different taxes and withholdings. Then, at tax time, teach them about under- and overpayments and demonstrate how to file a 1040-EZ.
Lesson 3: Debt Is a Double-Edged Sword
Financial experts argue about whether debt is necessary or best avoided completely, but most agree that there is a difference between “good” and “bad” debt. Instill the concept of “return on investment” in your teen.
For example, a low-rate mortgage for a property that will build long-term wealth is generally good value for the cost. Alternatively, frivolous high-interest credit card purchases may bring instant gratification, but result in future hardship.
Being open about money with your teenager is one of the most beneficial practices you could employ in your household. Apply these lessons by creating a budget together, and then demonstrate its importance by sticking to yours.