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Financial Wisdom for Teens: Essential Money Lessons

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According to psychology, children’s minds are like sponges. They absorb whatever they see and feel. Although this high receptive state loses its power as they grow older, the thing still remains in teenagers. You must be shocked to find that this receptive nature of the human mind also stays dominant in adulthood.

This is why we need to revise our money habits to show our children that we care about finances. Teenagers are likely to mimic the behaviours of the people around them. Here is where better behaviours from your end can help.

But you still need to teach your kids how to manage money. Experiences will do the rest. Defining money and displaying the statistics about it or sharing experiences of yours will work. Still, good money habits can do more.

This post has accumulated a few of them. Go through them and see if you can use them to teach your teenage child good money lessons.

  • Start by Giving Allowances 

You can give your kids allowances. Although they can get it for free while they’re really young, you will need to teach them how money is earned and not gotten. The simple way to do this is to teach them small house chores and give them allowances in return.

Make sure your teenage kids stay out of dangerous work. Do not assign them high-risk jobs. Give them lighter and easier tasks in the household or maybe help the neighbour with something (under your supervision) and give them money in return.

  • Now Teach Them How to Use the Allowance 

You may need to tell them why saving money is important. Of course, you can teach them to spend money. However, showing them the most overlooked area of finances – saving money – is also very important.

Give them something to reinforce their saving habits. Gift them a piggy bank. Set a deadline for saving money or create a money-saving goal for your child. Reinforce that habit by reminding them of savings. Make sure to create a fun and interesting saving goal which your child would enjoy.

  • Time to teach them about making a Budget!

Your teenage kid may not love it, particularly if he or she dislikes maths. Jokes apart, they are going to love it if you explain to them budgeting in fun ways.

The first lesson here is that you should consider here is the income-expenses balance. The beginning of budgeting happens with this statement: You should spend less than you earn. Now, you can save the money that’s left after spending. Or you can use it for some other cause. We will talk about it later.

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Using an application for a budget can become easy and interesting. There are many in the app stores. Mobile apps may help better because of their flexibility.

However, do not go with apps at the very first. Your children are still learning at this age. Teach them budgeting on simple pen and paper for some time and then switch to digital platforms.

  • Teach Them about Debt: Both Good and Bad  

Debt is something that many adults around the globe fear. No offence to their parents, but poor money lessons and poverty can sometimes cause you to get scared in the name of debt.

If you are scared of debt, then your kids will mimic the same behaviour. They will also consider debt as a monster. While expensive debt is financially stressful and it can affect your health, you can consolidate it.

You can take out direct lender bad credit loans (bad credit probabilities are linked with debt) and use them to consolidate all the previous lenders. If you already know these strategies, then it is time to tell your children about them.

Teaching them the types of debt and their differences matters. At this age, you can teach them simply about good debt and bad debt. A good debt means taking out money for your needs, such as borrowing student loans for education. A bad debt means borrowing money for wants, such as purchasing an expensive item.

Bad debt is called ‘bad’ because of several reasons. One of them is that they have unbearably high interest rates. Trying to buy something out of impulse through the process of taking out a loan can also be called bad debt. In fact, swiping your credit card too often can also cause bad debt.

Teach them not to fear debt but to learn good money lessons from it. Ask your teenage kid to take debt as a financial challenge to become more organised and aware of money.

If needed, give them small amounts of money as a loan and make a demo round to simulate the experience. Be the demo lender and set particular instalment amounts with interest that your kid needs to pay you. It’s fun.

  • Explain to Them the Importance of an Emergency Fund 

Teenagers might not know why emergency funds are very important unless they have faced an emergency. Sometimes, situations can push you to find out the necessity of an emergency account. Many of us realised it in adulthood.

It is time to teach your kids the real nature of emergencies. You can help them with this by telling them stories of how emergency situations can be managed by money. Tell them the best way to make and manage a fund for emergencies.

An interesting way to do that is to buy them another piggy bank. Ask them to use the 2nd piggy bank as an emergency account. Give them exciting emergency savings goals.

You may also teach them about borrowing money in emergencies. Even if they have an emergency fund, it may not contain enough cash. As a result, your kids might find themselves confused.

They can choose to take out online loans. For emergencies or urgent payments, a direct lending service can offer your teenage kid a same-day loan with no credit check.

Your kid needs to be clear in repaying the money. They can use any sort of income, such as part-time or freelance income or even student benefits, to repay the loan.

To Conclude: Tell them Your Story, Whether It is of Success or Failure

People learn from their mistakes. You might have made good financial choices, the fruit of which is enjoyable even today in your life. Or you may have found yourself in tough financial positions because of poor money choices.

You can keep hesitation aside and tell your teenage kids your story, no matter if you succeeded or failed. They might learn a lesson from it. As a matter of fact, the same habit will also be cultivated in your kid in the future.

It will be easier for them to unburden their mind by clearing hesitation. They will feel free to discuss their problems with you or others. Eventually, such conversations can bring out the solution to the problems faster.

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