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Let’s talk money

Money management is one of the most important life skills in terms of preparing for and navigating adulthood. While it’s not typically taught in grade school, it certainly should be.

How to help your kids understand and handle money

Here’s what parents can do to help their teens and preteens understand the basics of personal finance so they can handle their money responsibly at every life stage. Although you’ve probably been teaching about money through play with their toy grocery or ice cream store set-up in younger years, now that learning is starting to show up in the real world!

Teach about earning money

Teaching kids “the value of a dollar” might seem like a cliche, but it’s actually a really crucial life lesson. Until they’ve had their first job, many teens don’t quite grasp how much time or effort it takes to earn $1, $20, or $100.

If they’re not old enough to work a regular gig, consider paying your child to help with things around the house, like mowing the lawn or washing the car. They might also be able to earn some money by helping people in your neighborhood with babysitting, dog walking, or raking leaves.

Help them understand needs vs. wants

Another essential life lesson is understanding the difference between needs and wants. Explain to your child that needs are things that help them live and thrive, like a home, food, and transportation to school. Wants are everything else. A trip to the grocery store can be really instructional to talk about food needs and foods wants — and just how quickly things add up! Bonus points for looking for coupons or making a list before you go.

Set small savings goals

Once they have some of their own money, you can help your teen or preteen set small savings goals. You’ll have to help them understand that if they can resist spending all their money as it comes in, they can eventually afford bigger things they want, like concert tickets or a video game.

Offer a lesson in investing

You can also teach your kids that they can earn money just by having money (aka investing). For instance, they could lend their trusted parent cash for a date night, with the promise that the money will be paid back the very next day, plus 10% interest. Consider an app with options to buy fractional shares in companies they really like! It’s never too early to get a sense of how investing works.

Offer a lesson in interest

On the other hand, you can teach them about the cost of borrowing money they don’t have. For example, you might lend your teen money for a purchase if they agree to pay you back by a certain day (or in increments), plus a small amount in interest. This will help them understand the general concept of a credit card, and its pitfalls, before they’re old enough to get one.

Open a first bank account

It’s good to help your child open their first bank account before they graduate from high school. For middle schoolers, a savings account is probably the best option — it’s not attached to a debit card, but they can still withdraw cash if needed.

By age 15 or 16, you might want to help your teen open their first checking account with a linked savings account. This will help them understand how to deposit money, use a debit card, and separate their savings from their spending money. It should always be monitored by an adult, but never risk their future credit by using it for the family.

Help them make a budget

Budgeting is important at every age, and the earlier you learn it, the easier it is to stick with it. For preteens and younger kids, physical buckets are a great place to start. For instance, you can get three jars and label them “spending money,” “savings,” and “short-term goals.”

Mobile budgeting apps might be a better choice for high schoolers with smartphones. Some of the best ones for teens include Bankaroo, Rooster Money, Greenlight, Gohenry, and BusyKid.

Reviewed by the Ovia Health Clinical Team

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