Children start learning how money works once they reach their teenage years. They are not always quite old enough to start earning it in the workforce, but they know what their money can buy.
However, their teenage years are also when they typically understand how money can affect their relationships with their peers regarding wealth disparity. They might ask for expensive items like electronics to help them fit in, which can be more than the average family can sometimes afford.
If you don’t believe your teenager understands the value of money and how it can sometimes be challenging to get everything they want and need, here are a few money lessons you might like to teach.
Wants vs. Needs
While you can rely on short-term payday loan providers like My Canada Payday to purchase something you or your teenager wants, it won’t always be that easy. Continually buying things your teenager wants because they ask for them might teach them that making big-ticket purchases doesn’t require discussions, planning, time, and savings. Teach your teenager about needs versus wants so they understand that needs often take priority and you sometimes have to wait for things you want.
If your teenager asks for the latest shoes from their favorite brand, it might be within your power to buy them and keep your teenager happy. However, you can use this opportunity to teach them how to set money goals and work toward them to get what they want.
Establish the tag price, create a plan for how they can save, and establish how long it will take for them to get the shoes based on the money they can earn and set aside. When they see how long it can take through chores like lawn mowing, taking out the trash, and doing the laundry, they might start gaining a sense of the effort involved in earning and saving to fulfill their wants and needs.
Show Them How to Earn Money
It can sometimes be easier to give your teenager what they want than listen to them plead. However, you can use their desire for something to show them how to earn money themselves to pay for it.
Sit down together and come up with ways they can earn money, such as dog walking, babysitting if they’re competent and confident doing so, household chores, and yard work. If they already make an allowance, the money they earn from jobs might help them reach their money goals faster.
Talk About Money
It’s only natural to protect your children from money-related conversations in your house. They don’t need to know how much you earn or your mortgage payments. However, teenagers can be made aware of your family’s values concerning money and how far it truly goes so they can create healthy habits in the future.
Discuss how your family saves money and your typical response when people ask to borrow it. You might even make your views known regarding charitable donations and lending to family and friends. If you make money a taboo topic, you’re missing out on an opportunity to help your child manage their own money responsibly.
Teach Them Common Money Terms
Teenagers mostly have a fundamental understanding of money. They know they can earn and spend it, but there’s much more they need to know to be ready for the real world — and to avoid dangerous mistakes.
Interest is undoubtedly one of the most important terms your teen needs to learn. Interest refers to payments made to a lender above and beyond the amount you borrowed. Teach your teen by providing a real-world situation. If they want to borrow $10, charge them the average personal loan interest rate, which is often around 10%. When they know they will be repaying $11 for a $10 loan, they might have a greater grasp of what interest is and make wiser purchasing decisions in the future.
Educate Them On Basic Savings Rules
Many teens spend money as soon as they receive it. They see something they want, buy it, and don’t think about what they might have been able to purchase or achieve if they had saved their money. Educate them on basic savings rules such as 50/30/20. This savings rule involves spending up to half of their money on needs, 30% on wants, and 20% on savings and debt repayment. Most teenagers won’t have debts or significant needs that you won’t cover as their primary caregiver, but the financial principles might prove valuable in later life.
Spending money can be fun, and you might also get enjoyment out of buying things for your children. However, making them aware of the value of money can help them in later life. Take these actions above, and you might set them up for financial success.