Whether you have utilized the services of a financial coach or not, you can easily help your teen set up a financial plan by using the household budget as a model. Not only will this teach your teen financial responsibility, but it will also show them that a budget is a great way in which they can effectively save money for their future needs.
If you haven’t already done so, you can begin by assisting your teen in opening a savings account. This is a great way to teach them about interest rates. Give them the opportunity to research a number of banks and choose one that offers the highest rate of interest.
Once the savings account has been opened, it’s time to sit down with the teen and help them establish their budget. Reality hits hard when they realize there is not much money coming in, but a great deal going out.
However, let’s assume for argument’s sake that they have saved money received via gifts and a monthly allowance. Let’s also assume they have applied for and are working at a part-time job. It is decision time for them. How much are they willing to put away and how much do they need for recreational activities and other expenses?
More likely than not, they will not have enough to pay for most of the things they desire. After all, you have been providing for them all these years. You can compromise with the teen and match their contribution to their savings account on a monthly basis. This must also be based on a caveat that if the money runs out before the end of the month, they can’t ask you for additional money or withdraw any money from their account.
This will probably make them see in a whole new light how they spend their money. Moreover, they will have to refer to their budget to ensure they are staying within the guidelines they set out at the beginning.
You might also wish to teach them how to comparison shop and how to tweak their budget so that more money can be saved. It is a hard lesson for them to learn, but a necessary one.
If your teen runs out of money in the middle of the month, the best thing you can do is to refuse to supplement their budget. In this way, they will soon realize that overspending is neither appropriate nor responsible.
It may take a while for them to get used to, but in the end you are doing them a great service by giving them the advice and counsel they need to handle their own finances.
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