Mo' Money, No Problem
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Summer is over and as the school year begins, they're eyeing all the back-to-school goodies they can buy with their summer job money (if they haven't already spent it) - a prime time for illustrating valuable lessons.
Victoria College accounting and personal finance teacher, Melissa Chadd, talks about the importance of teaching teens personal finance principles. Use her 10 tips to help your kids secure their financial future.
1. Talk about money from an early age - You have to talk to your kids about money so that they know it isn't a taboo subject. Many parents completely neglect this entire topic. Parents need to begin teaching their kids about money when they are young and continue throughout their childhood.
2. Save - Help them set savings goals and then stick to them. There are many different philosophies out there regarding the amount you should save, but regardless of what percentage of your income you choose to set aside, the basic rule should be taught to teens that they need to save for emergencies and short/long term goals.
3. Pay yourself first (make saving automatic) - You should determine the amount you will save and then set it aside before spending your money. The more automated you can make it, the better (such as having a percentage automatically deducted from your paycheck and put into savings).
4. The power of compound interest - This will help them understand that the earlier they start saving, the better off they will be.
5. Living within their means - You shouldn't spend more than you have. We have been deluded into believing that we can afford something if we can charge it or get a loan for it. Credit is a useful tool, but not one that should be emphasized to teens. They instead need to first learn the concept of saving for something they want and only then purchasing it. This also teaches the concept of delayed gratification.
6. Basic budgeting/money management - Teach your teen how to manage money by giving them the responsibility for it. (i.e. give them a month's worth of lunch money that they have to manage.)
7. Basic banking - Help them open a savings account and a checking account (for older teens). Teach them how to track their balance, report discrepancies to the bank, balance their checkbook (many people today never reconcile their account because they rely on their online balance - teens need to understand that checks and other charges can remain outstanding for some time and are therefore not reflected in the online balance - so what they see online isn't necessarily what they have.)
8. Taxes - Teens need to understand the basics of payroll taxes and income taxes, for instance, why is their take-home check amount different than their gross pay and what receipts will they need to save for tax preparation.
9. Identity theft - Teens need to understand the potential hazards and how to protect their identity.
10. Teach by example - Kids will emulate the example they've been given. If you use money responsibly, your kids will see that and copy it. If you say you can't afford a necessity and then they see you purchase something frivolous, they may follow in your footsteps.