How did you learn about personal finance and how to be responsible with money? If you were lucky, your parents taught you. However, for many people, these lessons never came, and they had to learn through trial and error as they became adults. Whether you learned from your parents or taught yourself, you’ll want to pass those same lessons on to your children. You can do this with an age-appropriate series of steps that include teaching them how to manage an allowance, money from a part-time job and credit cards as well as working with them to pay for college.
Think About College
With tuition costs continuing to rise, it’s never too early to think about paying for your child’s college education. There are several options for savings, including a 529 plan, which allows funds to grow tax-free as long as they are used for education expenses. However, while parents want their children to be able to attend the college of their choice without paying crushing tuition prices, many also think it is important for them to contribute at least partly to their college expenses.
Many students borrow money to cover some of these costs. In your child’s last year of high school, you should help them fill out the Free Application for Federal Student Aid to find out what grants and loans they may be eligible for. If they do not qualify for any federal loans, they may be able to get a student loan from a private lender.
Give an Allowance
From a young age, children can be given a weekly allowance that they must manage if they want to have spending money. If they want something that costs more than their allowance, they have to save up for it, and if they spend all they have, they have to wait until the following week before they will have money again. Whether your child is five or fifteen, this can be a valuable early lesson in budgeting, saving and spending.
Getting a Part-Time Job
Older teens can benefit from getting a part-time job or working full time over the summer. While this job should not interfere with school and extracurricular activities, it can be illuminating for teens to earn money that they then have to manage. This is also a great opportunity for you to help them set up checking and savings accounts and start to put a little away in savings each pay period.
Maintaining Credit Cards
There are many stories about college students falling deeply into credit card debt after being flooded with offers their freshman year and having no idea how to manage the card. You can prevent this by getting a credit card for your child. You’ll probably have to make your child an authorized user on a card you apply for since most credit card companies have an age requirement of 18, but you can still make your child responsible for payments. This is a good opportunity to talk about interest and annual percentage rates. This can also help your child start to establish a good credit history.