The Big 5: Money Lessons for your Teen
Five Money Lessons Your Teen Needs to Hear
I am asked all the time, "What money lessons are most important for my teen to learn?"
I have got the answer.
This week, I have compiled the top 5 money principles you should introduce and your teen should put into action while they are still in your house and the stakes are small.
I learned these 5 money lessons the hard way throughout my twenties and the fallout lasted almost a decade. I wanted something better for my kids, and I know you do too.
So, let's dive into these important money lessons every teen should grasp before spreading their wings and leaving the nest.
Financial literacy and is an investment in yourself that pays dividends for life.
The “Big 5” Money Lessons:
1. How to plan your money so it will get you what you need when you need it.
Teens need to learn how to plan their money wisely so they can get what they need when they need it. This means understanding how much money they have, how much they need for different things like food, clothes, or saving up for something special and then figuring out a plan to make sure they have enough when the time comes.
It's like mapping out a journey – you need to know where you're going and how you're going to get there. Planning your money helps you avoid running out when you really need it and makes sure you can afford the things that matter most to you.
2. How to spend money and keep track of what you've spent.
Learning how to spend money wisely and keeping track of what you've spent is a crucial lesson for teens. It's like having a road map for your finances, helping you stay on track and avoid overspending.
One way your teen can do this is by setting a budget. They can start by identifying their needs versus their wants – things you have to buy versus things you'd like to have. Then, allocate a certain amount of money for each category, like dining, entertainment, and clothes.
As they spend, they need to keep track of every purchase, whether it's in a notebook or using a budgeting app. This way, they can see where their money is going and make adjustments if needed.
By learning to spend mindfully and track expenses, teens will develop good money habits that will serve them well into adulthood.
3. Where to put your money for current and future spending
Parents, it's essential to teach your teens where to put their money for both current and future spending. This lesson sets the groundwork for their financial stability and security.
Start by explaining the concept of savings accounts and how they work. Encourage your teens to set aside a portion of their money regularly into a savings account, emphasizing the importance of saving for emergencies and future goals.
Also, introduce the idea of investing for longer-term financial growth. Teach them about different investment options like stocks, bonds, and mutual funds, and how they can contribute to building wealth over time.
By instilling these principles early on, you're empowering your teens to make informed decisions about their finances and set themselves up for a brighter financial future.
4. How to use research and negotiation to earn more and save more money
Teaching your teens how to use research and negotiation to earn more and save more money is a valuable lesson that will serve them well throughout their lives.
Encourage your teens to explore different ways to increase their income, whether it's through part-time jobs, freelance work, or entrepreneurial ventures. Teach them the importance of researching job opportunities, understanding market rates, and negotiating their salaries or rates.
Another good habit to teach is to compare prices and seek out deals when making purchases, whether it's for groceries, clothes, or big-ticket items.
By equipping your teens with these research and negotiation skills, you're empowering them to make the most of their resources.
5. How and where to invest to grow your money
Teaching teens how and where to invest to grow their money is a fundamental lesson every parent should impart. You can start by introducing the concept of investing and explaining how it differs from saving.
Help your teens understand the various investment options available, such as stocks, bonds, mutual funds, and real estate. Discuss the potential risks and rewards associated with each investment type.
Encourage your teens to do their research and seek guidance from reputable sources before making any investment decisions. By instilling these investment principles early on, you're setting your teens on a path toward financial independence and long-term wealth accumulation.
Money Lessons to Learn Before Leaving Home
Every teen should grasp these five money lessons before leaving home. Learning how to plan and track spending, where to put money for current and future needs, how to earn and save more through research and negotiation, and understanding how and where to invest all set the foundation for financial success.
These lessons empower teens to make informed decisions about their finances, avoid common pitfalls, and work towards their financial goals.
By instilling these skills early on, parents equip their teens with the tools they need to navigate the complexities of personal finance, setting them on a path toward a secure and prosperous future.
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About Beyond Personal Finance: Beyond Personal Finance gives teens (middle & high school) the chance to design their future to see if they can really afford the life they dream of. In one semester (20 lessons- less than 2 hours per lesson), your teen will choose (and budget for) a career, car, apartment, spouse, house, investments, and so much more. This is the class your teen will get excited about.