Have you ever looked back on life and wish you could go back and tell your younger self something? If so, what would you tell yourself as a teenager?
I tell people daily I would go back and give financial advice to myself as a teenager.
I have been a CPA for over 15 years and have worked in taxes and accounting for more than 20 years. I’ve met with people from all walks of life and have seen every financial situation possible over the last 20 years. The top two complaints from young adults and parents are 1) they wish they would have taught their children how to do chores because they go off to college and don’t know how to do simple tasks like washing the dishes or wash clothes properly and 2) they wish they would have been taught about finances as a child.
I’m here to give you some top financial tips you can start teaching your child at ANY age. Start talking to them when they are young about saving money they receive. Teach them how to calculate sales tax and what it means to budget. If they start getting familiar with the terms at a young age, then when they transition to a teenager, they have a head start. If you haven’t started any money conversations yet, don’t worry; it’s not too late.
Here are some TOP financial tips for teenagers.
Financial Tips for Teenagers
- Learn how to balance a check register
- Learn how to save money
- For retirement
- For purchases
- Learn how to budget. Dave Ramsey has a great youth program.
- Credit score. How it can help you or hurt you. Great information [HERE]
- Understanding credit cards. If you do not pay off your credit card each month, you will be charged interest on the money you spent. The average interest rate is 17% for a credit card. Example: If you spent $200 in a month on a credit card and only paid the $15 minimum payment. Your balance next month will be $187.83, assuming you make no more purchases. It will take you 15 months to pay this balance off, and you will have paid $223.24 for that $200 item. Here is a credit card calculator from Bankrate.
- 0% promotional financing. If you buy something and do not pay it off before the promotional period ends, you will sometimes pay 17-29% in interest on the ORIGINAL amount you got on the loan. Example: If you borrow $1500 and pay $750 during the promotional period and do not pay the entire $1500. The company will charge you interest on the full $1500. You will owe 18% interest on $1500 + $750 remaining balance.
- Student loans – it’s an easy way to pay for your education upfront, but 20 years later, it isn’t. Many clients come in that have never used their education in their field of work. But they are still paying for their loans for the education they didn’t use. Also, many clients found careers before they got their degree, but they still have to pay for their student loans even if they dropped out.
- Compound interest is interest paid or earned on the principal balance and the interest accumulated.
- Bad for credit cards. In the credit card example above, you have to pay interest on your interest.
- Good for investments.
- Learn about Debt
- Good for investment purchases (i.e., house) When you use debt for investment purposes, you are acquiring an income-producing asset.
- Bad for buying things you want (i.e., car, boat, clothes, electronics) When you use debt for something you want, all you are doing is acquiring a depreciating asset that you most likely won’t get any value back out of.
- Taxes – learn the difference between Income Tax, Sales Tax, social security, Medicare taxes, and property taxes. If you live in a state that pays state income tax, learns about that as well.
- Moving out is always fun, but the bills that come along with it aren’t. Teach them about utility bills.
- Take the emotion out of large purchases and investments.
- Find a way to make enough money to support yourself doing something you love.
Hopefully, this list will help you open up the conversation with your child and help them better understand exactly how finances work. Often, we want to protect our children from knowing about the hard life things, but finances are not one of those topics we should shield them from. We should empower them to learn as much as possible so you can set them up for the best financial position they will ever be in. Trust me. They will thank you when they are older.
As parents, you may think you want your child always to look the best or have the best clothes or sports equipment.
But wouldn’t it be even better when they are older to have the best bank account with the best credit score?
Set them up for success!