One of the best ways to create a fiscally responsible adult is by training them to handle financial issues as a child. Teaching your kids to manage money is no easy task. They may be much more concerned with what’s going on in pop culture, their latest gadget, or just having fun as a kid. With the growing list of items that they desire, they may really think that money grows on trees. It’s never too late to teach your kid about money, even if they are about to graduate from high school. High school seniors are probably the most important group to equip with financial strategies because they are about to enter the real world. Here are five things to teach your soon-to-be grad before they enter the halls of higher learning:
1. Have them attend a financial literacy program.
Many banks and credit unions offer financial literacy programs that teach young people the principles of financial management. Financial literacy programs teach teenagers how to build good saving habits for the future. They learn how to balance their checking accounts and techniques to avoid overspending. This is all useful information for your soon-to-be college freshman. At the end of these programs, financial institutions often give away cash rewards and other prizes to all attendees. You can complete most programs in two or three weekends. Just beware of the institutions that will push their products to college-bound freshman such as credit cards and car loans. A credit union might be your best bet on this one.
2. Teach your kid how to create a budget.
Creating a budget is an easy process and your high school grad can learn from your example. Does your teen have a summer job lined up? Maybe they are cutting grass, working at the local movie theater, or working at a summer camp. No matter what the job is, you can teach them to keep track of their income and expenses. Your teen will be able to see where they are spending their hard-earned cash. You can either buy them a notepad or give them the gift of financial software. Quicken is one of the most popular personal financial management software programs. Are you looking for free sites that offer planning tools? Try out Mint.com or Wesabe.com. These sites will help you and your grad create a budget in no time.
3. Start a Roth IRA.
You probably thought that you have to be a full-time working adult to start a Roth IRA. Not true! There is no age limit for a Roth IRA. If your high school grad is earning income, they are eligible to contribute to a Roth IRA. What better way to teach your kid the value of saving than to show them how to save for their financial independence. The earlier that you get your child saving, the better their chances at accruing wealth.
4. Show them the family finances.
Many parents don’t like for their kids to see the family finances but your child has to learn sometime. Most kids are unaware how expensive items are. Show them how expensive things like car insurance, utilities, and car payments can be. Let them see how credit card payments can eat up your finances. Introduce them to Mr. FICA so they can see how much money is paid to the government in the form of taxes. This may not be easy, but remember you are preparing your teen for the real world.
5. Let them pay their own bills.
The last few months before your child leaves for college, have them start buying their own clothes, cell phone bills, and entertainment. If they don’t get a summer job, create a list of chores that are above and beyond their normal ones where they can earn money off of you. If they spend all of their money then they can’t make any more purchases for the month unless they go out and earn more. This is a great way to teach your child how to manage their bills.
Do you feel like your parents adequately prepared you to deal with money management issues in college? If not, what would you like to have known?
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