As a parent, you handle most of your child’s needs. As the child grows into a teen, it is time to give that child the ability to learn how to properly manage finances. It is a big step, but a necessary one. If a child learns how to manage money now, he or she will do better managing expenses into the future. This makes a big difference throughout life.
Teaching teens to manage money can be hard, however, most teens can learn some basics of money management with your help. One of the first steps is to help a child to earn money and to manage the spending of that money. Open a checking account for the older teen. Allow the teen to make deposits and withdrawals as he needs or wants to. Teach the skills of balancing a checkbook.
Move forward from this point by teaching proper money management, with a focus on credit. Credit building is something teens can begin to work on. One way to do this is with the use of prepaid credit cards. These cards require a deposit. The amount of the deposit establishes a credit line. Like a credit card, the user can make purchases with the card and then repay the borrowed amount each month. Some cards report the activity on the card to the credit bureaus. This helps to establish a credit limit and allows the user to build credit over time.
Good financial management is key, though. When using these cards or other types of credit, the teen needs to focus on spending less on “wants” and putting money aside for savings. In addition, he should not borrow more than he can repay.
Teaching a teen to build credit and to manage money can be a fun experience. Many teens are anxious to learn. Be sure to explain the importance of a good credit score, since this score will follow the teen throughout life.