Set your teen on a path to financial success by teaching them how to manage money early on. At a time when many Canadians are carrying a great deal of debt, these life lessons can be invaluable. Financial literacy is an important topic, but it’s not always taught in school, so it’s up to you as a parent to instill good spending habits in your child when they’re young. It’s better for them to make small mistakes now than when they’re older and the financial stakes are higher.
Start them off with an allowance
Giving your child money to tackle everyday household chores is a dated idea. Your teen shouldn’t have to be rewarded with financial incentives just for doing things that are expected of them as a contributing household member. Consider awarding them for doing work that goes beyond their regular chores that reflects their willingness to earn, like cleaning out the garage or taking care of siblings. Kids always love a game so why not challenge them to save a certain amount each month for the chance to earn a bonus.
Show an interest in their purchases
Give your child some guidance around saving to reinforce good habits. Ask them what they want to purchase, then help them figure out how much it costs and how long it might take them to earn enough money. Consider setting up a schedule to keep them on track with their savings goals.
Differentiate between needs and wants
Help your teen identify the difference between things they need and things they want. Sure, they may want the latest cell phone but if it’s completely out of their price range, encourage them to consider a different version or purchase one second-hand. Most likely, they don’t need all the added features, they just need it to work. It’s important to help them set realistic limits they can stick to.
Develop their understanding of value
There are other things to consider besides price when making a purchase. Some things cost more because they’re better quality and designed to last longer. They could buy the $10 shirt all their friends are wearing that falls apart after a few washes or, spend a little more and get something that will last them for years. At the same time, maybe the “no name” cookies are a better value because they’re cheaper but just as good as some of the brand name treats. Improving their skills to identify value is all part of the financial literacy learning process.
Put an emphasis on patience
We live in a world that’s all about instant gratification. But when it comes to saving money, patience is key. When your teen discovers that what they could have later could be more valuable than what they can get now, they gain the ability to understand the connection between time and money. In the long run, this will help your child in any future career as they begin to determine how much their time is worth, especially when balancing work and personal life.
As your teen becomes more independent, they’ll take those healthy financial habits you’ve taught them wherever they go.