Whether you’ve hired a high schooler or college-aged student at your business recently or have teens at home, teaching financial literacy is vitally important. It’s in the best interest of our future workforce to be wise with their money, make responsible spending and saving decisions, and experience financial success.
Teaching teenagers how to be wise with their money can set them up for success for the rest of their lives. This month, Senior Vice President George Butkovich and the rest of the Platinum Bank team shares the top three things you can teach your teens about money. For tips for little kids, check out last month’s blog post.
1. The Value of Good Credit
Nothing affects an individual’s ability to grow wealth more than credit. Buying a car, purchasing a home, and increasingly, being gainfully employed, are all dependent on having a good credit score. Without good credit, it can be impossible to make the purchases that set people up for future wealth, primarily their own home. While these purchases may seem far off to a teenager, adults know they’re just five to fifteen years away.
The best thing you can teach your teenagers about money is how to build good credit and avoid being burdened by poor credit. Show them what credit card companies and other lenders are looking for when they decide to award a credit card or approve a loan. Help them manage their first credit card and put them on the path toward building credit. And when they want to make decisions that may hurt their credit, take the time to explain to them why it’s a bad idea with real-life, concrete examples, perhaps from your own financial journey.
2. How to Create and Stick to a Budget
Fortunately, people who learn how to create and stick to a budget often do not run into issues with credit. That’s because they are fluent in how to live within their means. They understand the value of the money they make and make informed decisions about how they spend their hard-earned cash. They also know what their financial responsibilities are and what purchases can and cannot wait. You can teach all of these skills be helping your teen create and stick to a budget. Work with them to create a list of monthly obligations, such as gas and car insurance, and discretionary spending, including video game subscriptions and cash for shopping. Then, add up their monthly take-home pay. Does your kid have enough to cover their obligations with some left over? If so, ask them what they’d like to do with that money—do they want to grow it or spend it?
3. Saving for Retirement
Many adults look back at their young adult years and wish they had started putting aside money from retirement as soon as possible. Socking away just $25 a month when you’re young can make a big impact long-term. Encourage teens to incorporate saving for retirement into their monthly budgets. Not only is this a great lesson in deferred gratification, it can help them see how investment tools work to grow wealth. Several savings options are available for teens and young adults with part-time income.
Financial responsibility and literacy are vitally important for teens and young adults. The foundation you lay during these years sets them up for financial success for the rest of their lives. For more financial tips for kids, adults, and businesses, check out the Platinum Bank blog.