Why Teach Your Kids Smart Money Management?

When kids are little, it’s pretty easy to teach them how to save with some coins and a piggy bank. But as kids turn into teens, finances get more complex. They are earning money and may have a few bills like a cell phone or car insurance.

Financial education needs to grow as your children grow. Here’s why:

Teens spend money
No surprise here. Teenagers in the U.S. spend over $84 billion a year.  The money, which averages to about $3,200 per teen, comes primarily from parents and jobs. This money is mainly spent on clothing, food, entertainment, personal-appearance products, recorded music, and transportation.

Budgeting is complicated
Budgeting is complicated and has many steps. Teens have the math and organizational skills needed to learn how to divvy up the money they receive between bills, saving, spending, and maybe even charitable donations. Budgeting skills develop from the attitudes and spending habits learned at home, school, and social circles. Those teens that learn good money management early are likely to become adults who can make sound financial decisions to reach their lifetime goals.

College-ready
You wouldn’t just hand your teen the car keys one day and say, "Go drive." Before they get a driver’s license, there’s driver’s education and lots of time spent behind the wheel with an experienced driver.

You need to have the same philosophy with financial management tools. It’s best to teach your teen how to use a checking account, ATM card, and credit card while still at home. That way, you can monitor their spending habits, review and correct mistakes with them, and make sure credit card bills are getting paid on time.

As they head off to college, there may be a few tears, but it won’t be because you’re terrified of bouncing checks and past due bills.

Shields from future debt
Forty-five percent of college students are in credit card debt. The average credit card debt is more than $3,000. The number of 18- to 24-year-olds declaring bankruptcy has increased 96% in 10 years. Given these staggering statistics, you can see why it’s important to teach your teen how to use a credit card responsibly. Future debt load can cost your child thousands of dollars in accrued interest and higher rates on auto and home loans.

Financial success and independence
Young adults who possess smart money management skills are more likely to handle adult financial situations such as purchasing a new home, buying adequate insurance, handling credit wisely, and saving for retirement.