Financial wellness is all about successfully managing your income and expenses. The earlier you start learning about how to do it, the better. Teenagers should start thinking about their finances sooner rather than later.
While teens might not consider money to be the most exciting topic, managing it well can, quite literally, pay huge dividends. The following wellness tips can help teens get a grip on their finances from the start of their adult lives.
1. Get a Job.
The first step to financial wellness is having a source of income. Money is required to spend, save, and invest. In order to make money, you need to obtain a job.
There are several employment options for teens that can accommodate school schedules and provide valuable experience. Look for part-time options at local grocery stores, movie theaters, and fast food restaurants. Networking might even provide a more niche opportunity, like a family friend's dental practice.
2. Start Saving.
Once teens start earning, it's time to begin saving. A savings account can help them make big purchases, get ready for college, and prepare for emergencies. Having a healthy savings fund protects them no matter where their life takes them.
Teens can take advantage of minimal expenses to really kick start their savings. Not having to pay rent, utilities, and insurance means more money in the bank.
Saving isn't sexy, so many teens forget to do it. Debit cards that round up purchases can make saving as easy as spending - something teens are more than happy to do.
3. Learn to Budget.
As an adult, much of your financial wellbeing is determined by how well you budget. A balanced budget helps you control your spending and encourages you to save. This enables you to live within your means while preparing for the future, as well as making room for some of life's joys.
Show your teen how to do it. Start by listing out your child's expenses. As mentioned before, teens don't have to spend as much, but this will help them develop a good budgeting pattern.
After taking care of basic needs, help them decide what to do with what's left. Saving should be their top priority. The rest can be divided among their favorite activities, such as buying video games or going out to eat.
4. Start Building Credit.
A line of credit makes it possible to make major purchases. Teens who start building credit early will come to realize this for themselves. Good credit helps you qualify for better rates when taking out loans for things like a home or a new car.
Parents can help their teens build credit by helping them get a secured credit card or by adding their name to recurring payments, such as their phone bill. As they diligently pay these off, their credit will increase.
Remind your teen that credit scores are hard to build and easy to damage. A credit card in bad standing can dog their financial life for years.
5. Learn About Opportunity Costs.
Again, teenagers love to spend their money. What they need to keep in mind while making purchases is opportunity cost: Every dollar they spend is one they can't save, invest, or spend elsewhere.
Here's a way to explain it to your teen: Say you have $15 allocated for a weekend outing. You can choose to go see a movie and grab a snack for that price. However, by doing so you won't be able to go out to lunch with your friends.
Financial wellness is about realizing you can't have it all. Make sure your teen knows his or her priorities.
6. Avoid Debt.
Debt can be crippling. In some cases, however, debt is necessary. Very few people have enough cash to pay for college tuition or purchase a house outright. The key is to avoid unnecessary debt whenever possible.
Credit cards are the biggest threat to financial wellness. They make it far too easy to spend money you don't have, and interest changes can snowball quickly.
Your teen should also understand that some types of debt are good. Getting an education is likely to net your teen more than it costs. Because homes appreciate in value, mortgages are another good type of debt.
7. Listen to Experts.
The good news is, your teen doesn't have to do it all on their own. Teenagers can get overwhelmed when thinking about financial responsibilities. They can, and should, seek the guidance of those who understand the ins and outs of consumer finance.
Parents and teachers should always be go-to resources, but teens can also learn about financial wellness from other sources. Informational videos and podcasts might be more engaging for a tech-loving teen. Financial advisors can shed light on all sorts of finance topics neither you nor your teen may understand.
8. Shop Smartly.
If you have a teenager, take them with you the next time you go grocery shopping. Use this trip as an opportunity to teach them about smart shopping. Show them that similar products may have different prices, and how being careful and meticulous can save them a lot of money.
Teenagers without financial savvy can end up blowing a lot of money on name-brand products or luxury items. A bag of rice is cheaper than a boxed rice dinner, despite the fact that their contents are mostly the same.
This also ties back to budgeting. Buying something that's out of your budget is never a good idea, no matter how deeply it's discounted.
9. Seize Opportunities.
One truth of consumer finance that is often left out of the picture is the importance of taking opportunities as they come. Their second-choice school may offer them a massive scholarship - an opportunity they should think hard about passing up.
Not all opportunities are so obvious. An internship may be unpaid - but it could turn into a lucrative job. Teens need to try things in order to realize those sorts of opportunities.
Financial wellness can't be taught in a day. Give your teen lessons here and there, and they'll be an expert before they have to live as an autonomous adult.
