While most children and teens are taught things like reading, math, science, and social studies as part of their formal education, one very important subject that will affect them for the rest of their lives often gets forgotten: managing their finances.
In order to live a successful life, children and teens need to be taught from an early age how to put themselves on a path to financial freedom. So to help you in giving them this type of education, here are three things every teen should know about managing their finances.
Why Good Credit Is Important
Before your child becomes an adult, credit isn’t really something they’re going to be worried about. But as soon as your teen becomes an adult and wants to do something like purchase their first car, rent an apartment, or apply for a credit card, their credit history is going to become very important.
According to Mint.com, one of the best ways to explain credit to your teen is to talk about it like you would their grades. When your teen does something that lenders or creditors like, they get a better grade. But when they do something risky or fail to do what they say they will, their credit score suffers. Knowing this, your teen will hopefully be able to see why having good credit is vital to their life and what they can do to keep their credit score high.
It’s Best To Pay With Cash
As soon as your teen becomes an adult, they’re going to have the capabilities to get their own credit card. And while having access to money that will allow you to purchase what you want right now, it’s wise to teach your teen the benefit of paying for items with cash rather than credit.
Chris Muller, a contributor to Money Under 30, shares that many teens and young adults today don’t take the time to save for what they want, choosing instant gratification instead. But if you can instill in your teens the ability to wait to buy something until they have the money to do it, they’ll be in a much better place financially.
Save And Invest Sooner Rather Than Later
When your teen is young, they may feel like they have their whole life to save or invest their money. But if your teen never learns the benefit of saving their money or investing early in life, they may wait until it’s too late to get a good result from these things. With this in mind, Kimberly Palmer, a contributor to U.S. News and World Report, advises that you teach your teen not to shy away from saving money or choosing to invest it.
To help your teen live as a responsible adult, consider using the tips mentioned above to teach your teen about managing their finances now.