Summer is a good time to think about teaching children and young adults about money. Maybe they are getting their first summer job as a teen or a permanent one after graduation or they are headed off to college in the fall. With more money and independence, comes the need to learn how to spend responsibly. Ideally, some of these financial steps should have been taken when they were younger, but it’s never too late to educate your kids and help them build good habits.

  1. Find a financial literacy class. All teens and young adults should take a financial literacy class to learn about budgeting, savings, debt, credit, investing, and other basics. If they didn’t take a class in school, now is the time.
  2. Start saving. From the time children begin getting an allowance, they should learn to set aside some money for savings. Once they have a job, it’s even more crucial. The idea of working toward a goal and not spending every dollar as it comes in teaches patience and prioritizing.
  3. Open a bank account. Allow your teen to open a savings and checking account and have his or her own debit card. Teach them how to track their spending and balance their checking account.
  4. Explain their paycheck. Kids are often surprised at how much comes out of their paychecks for taxes, social security, insurance, and other items. While no one likes paying this money, these funds are used to fund things we (individually and as a society) may need now or in the future.
  5. Contribute to a Roth IRA. Once teens and young adults have a job, they can start saving for retirement. Individuals can put away money in a Roth IRA and it will grow tax-free for decades. This also presents an opportunity to teach them how to invest money for the long term.
  6. Discuss college costs and student loans. Parents should determine what they can afford so children understand how much they may need to borrow and what they have to earn to pay it back after graduation. Also, consider how to reduce loans through financial aid, scholarships, part-time work, choice of school, and other ways.
  7. Explain how credit cards work. Credit cards make it easy to rack up debt that has to be paid back at extremely high interest rates. Kids must monitor their charges to ensure they can pay bills at the end of the month.
  8. Create a budget. Show kids how to track their income and expenses and use that information to develop a budget. This enables them to understand what they can afford and make adjustments so they can save for a goal and live within their means. Budgeting apps can be helpful with this.
  9. Encourage charitable giving. Children should learn how to evaluate a legitimate charity and consider how they can make a difference, whether through donations or volunteering time to a cause that is meaningful to them.
  10. Set a good example. Children learn by watching their parents. If you overspend or fear spending, let bills stack up and struggle with debt, or argue with your spouse about money, your children are absorbing those lessons. The best thing you can do for your kids is to improve your financial literacy and take control of your finances.

If you need help managing your day-to-day finances, I can help by handling these tasks for you or teaching you how to do it for yourself. Contact me for a free consultation.