Nobody ever sets out to make abunch of mistakes with their money.
You take out a couple of student loans, then you put an emergency on the credit card, then you lease a new car, and slowly you start to build a massive hole of debt that takes years to climb out of.
It's usually a very slow process, not something that happens overnight. That's why it's so important to learn good money habits early in life - so the bad decisions you made when you were 20 aren't still haunting you when you're 30 and beyond.
As a parent, you have the opportunity to teach your teenagers how to make those good decisions and prepare them for the future. All you need to do is start with the basics. Even if you don't have it all together financially, that's OK. You both can work together!
So what are some of the basic money principles you should be teaching your teens?
1. Budgeting is about more than budgeting.
When you teach your kids about budgeting, you're really just teaching them how to plan. Zig Ziglar said, "If you aim at nothing, you will hit it every time." This is a principle that will help them in every area of their lives, not just with their money.
Give your teenagers a chance to open their own checking accounts, budget their own money, and even make their own mistakes. With the budget, let them write down all their expenses - every dollar - and spend it on purpose before the month begins.
2. Save now and save later.
Teens need to learn to save for three areas: purchases, an emergency fund, and wealth building. Saving for purchases is easy - that's my favorite one!
But the other two are just as important. For teens, I recommend $500 in an emergency fund. This will cover things like car repairs and even unexpected purchases. By focusing on saving, they'll learn to start relying on themselves when an emergency hits, and not you. It's a win for everyone! And it's never too early to start saving for the future.
Your teen doesn't have to be a mutual fund genius. But if you can help her understand the power of compound interest, you can really set her up to win with money for the rest of her life.
3. Give, give, give.
My parents taught me over and over how important it is to share, give, and be gracious stewards of what we've been blessed with. If you didn't talk to your teens about giving when they were younger, now's the time to make it stick. Giving is so powerful because it changes the giver as well as the recipient. How do you teach your kids how to give?
Start giving yourself. When they see giving modeled in your own life, and they see the positive consequences of giving, they'll be much more likely to give on their own. And remember, this is about your teens giving their own money - not yours!
4. Spend with purpose.
I've already told you how I'm a natural spender, and I know that a lot of you are, too. The key to being a responsible spender, though, goes back to my first point about budgeting. If your teens are spending their money on the same day they receive it, then they will never understand how to be patient and purposeful with their income.
The envelope system is a great way to teach your kids how to spend money in a healthy way. After completing the budget, you put specific amounts in envelopes labeled "save," "spend," and "give." You can even break down the spending a little bit more into "entertainment," "gas," and those types of categories. When the money's gone, the money's gone. These envelopes are an easy visual into how much you've spent and how much you have left.
5. Stay away from debt.
If I were my dad, this is the part of the article where I would tell you that "debt is dumb, and cash is king!" And it's true! Two of the biggest temptations with debt your teen will face in the next few years are credit cards and student loans. Your kids are going to face a barrage of myths about debt as they head off to college:
"Normal is broke."
"You can't be a student without a loan."
"Car payments are just a part of life."
"You can't live without a credit score."
None of this is true. So now's the time to tackle this subject with them before they walk out your door and step on a college campus.
Remember, more is caught than taught. The best thing you can do for your kids is to live out these principles in your own life. That will go much further than blindsiding them with a lecture or a heart-to-heart talk.
You don't have to be perfect-no one is when it comes to money. We all make mistakes! But you need to be a strong example to your children, or none of what you say will matter.
Also be honest about your past failures. I learned so much from my parents because they were open with me about the money mistakes they made before having kids. That transparency goes a long way.
Teach your teens these money basics, and you'll take the first step to setting them up to win with money for the rest of their lives.
This article is courtesy of Parenting Teens Magazine.