No One Is Born With Money Management Skills!

Money management for teenagers will teach your teen about a credit or debit cards and how to create wealth. In fact, it will teach them how to become a millionaire.

Remember parents, your children are watching and learning by the example that you set. They are very likely to copy you. After all, you were their hero during those formative and habit-shaping years.

No one is born knowing how to spend wisely and save regularly. The process can take years to develop. The blank slate that everyone is born with must be cultivated and nurtured if we are to develop into financially responsible adults.

Failure to teach children how to separate their "wants" from their "needs", will often result in them living from paycheck to paycheck. As a result, they will have no retirement savings.

Parents must instill in their children a good work ethic and money management skills long before they become teenagers. If parents do not find those "teachable moments" prior to the teenage years, it is likely that the message will fall on a teenager's deaf ears.

Ages 15 To 25 Are Critically Important!   (Money Management for Teenagers)

I believe that the 10 year period between ages 15 and 25 is the most important time in most people's lives. During these 10 years we choose our educational path, a career, a mate (sometimes), make lots of mistakes, do some experimenting, etc.

Think about the people that you know. For how many of them was this the most important 10 years of their lives? How did the things that they did during those years have a lasting effect on the rest of their lives?

If the correct choices are not made, it could sabotage the remainder of their lives including the retirement years. During these years the teenager and young adult should have the opportunity to learn the following:

  • Pay Yourself FirstRegardless of how much money you earn at your part-time job, always put the first $5 (or more) into a savings account.
  • Realize That Money Can Work for You. Money in a savings or investment account will earn interest. The magic of compound interest can make you a millionaire.
  • Do Not Adjust Spending to Your Account Balance. Doing this will sabotage your financial future.
  • Understand the Difference Between "Wants" and "Needs". Delay purchases to a later date. It is called "delaying gratification".  It can be a money saving practice as the purchase may never occur.
  • Live Frugally. Live below your means. Take advantage of student discounts at movies, restaurants, etc.

Here Are Some of the Things That Parents Must or Should Do!

Have your high school student pay the family's bills for a month. He/she can write each check and do all the things that you would do. Two things will happen. First, they will realize how much money it takes to run a household. And second, they will get some experience doing what they will be doing in the future. If you pay your bills online through your bank, they can do that.

If you have a home mortgage, explain it to them. Include the decisions that you needed to make prior to taking out the mortgage. Another way to teach economics is to explain why you bought a used car that you could afford rather than buying a new car and financing it. That is the way to teach money management for teenagers.

Next, stop at an ATM and withdraw some cash. Explain to the teenager how the money that you received is deducted from your bank account. This is the perfect time to explain how banks work and how they make their money.

Teenagers will eventually use a debit and credit card. Now is the time to explain why you use these cards and pay the entire balance on your credit card each month. I explain it this way. "If I do not pay the full balance on my credit card each month, the item that I purchased will end up costing me more." 

I suggest obtaining a credit card for a responsible teenager with a low credit limit ($100, for example). Require that the full balance be paid each month. They will undoubtedly ask about the minimum payment option. This is the time to explain that the interest rate may be over 15 percent. The rate is that high, because it is an instant loan without any collateral.

Teenagers learn from their parents, their friends, TV, at school, and from their own mistakes. I strongly recommend that parents be the primary influence. But, allow them to make mistakes and learn from them.

Teach Your Teenager How to Become a Millionaire!

Every child has a desire to learn about money. It is a big part of their lives. It is even a bigger part of a teenager's life. Talk to them about your financial successes and failures. Don't wait until they have too many other interests and are no longer interested in listening. 

They should learn about income taxes, sales tax, loans, mortgages and compound interest. Make them aware that the purpose of advertisements is to separate them from their money.

Becoming a millionaire is possible. But, first a teenager must develop a really good "work ethic" and money management skills.

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