Having some degree of financial literacy is a necessity as kids enter the world of adulthood. Turning a blind eye to debt, savings and budgeting can result in some pricey consequences down the road that may take years to recover from. Teaching teenagers about money early on is the best way to get them ahead of the game and prepare them for adult life. Here are a few things that every teen should know about money.
1. ATMs and Pinpad Safety
While using an ATM or pinpad is fairly straightforward, knowing how to use them safely may be less obvious. To prevent theft of personal information and pin numbers, remind your teen to always cover their hand as they enter their pin at a machine or ATM. Make it a habit to take a quick look around to be sure no one is watching before using your banking codes. If the machine looks suspicious or something seems off, use a different machine or bring it to the attention of an associate.
Always keep your pin code a secret. Remember not to store it on your phone or somewhere easily found and don't share with others, even your friends.
2. Credit Cards and Debt
Credit cards can be a blessing or a curse, depending on how you use them. It is vital to explain to your teens that credit is not ‘free money’ to be spent without a second thought. Teach your teen to only use a credit card if they are in an emergency, or if they know they can pay off the balance within the next 30 days. If there is any doubt and its not an emergency – don’t spend!
Careless use of credit cards can easily lead a teen down the dark, slippery slope known as debt – and once you’re in debt, it can be a struggle to get out again. This is because of one thing: Interest. If you can’t pay off your credit card balance, interest starts to accumulate, sometimes by as much as 22%! Before your teen gets their first card, make sure they are aware of the dangers of debt. A good way to start with cards is to get a debit card. This way they practice spending with money, but it is real money - not borrowed.
3. Saving and Budgeting
Spending money wisely can be a difficult feat for an adolescent. With so many wants and so little resources, money seems to just fly out of their hands! Trying to teach your teenager how to budget properly and put away money for a rainy day may elicit an eye-roll, however it couldn't be a more important lesson. Help them work out a spending budget for the month, and put the remaining money into a savings account. Consistency is key!