Not surprisingly, there is a massive lack of financial literacy in this country. While schools should teach this important concept, a lot don’t. So, many of the lessons are either learned from parents or from the school of hard knocks.
April is Financial Literacy Month. At TFNB Your Bank for Life, we want to use this time to focus on the rising generation and fill in their financial education gaps. The ability to understand and earn money, save, budget and use their finances wisely is so important to our happiness in life. And after high school, when your teen enters the “adult world”, these financial skills become even more important.
How can you help your teen prepare for a financially successful future? Start with these five lessons.
It's All About the Budget
- The lesson:
Many teens are likely to spend their allowance or part-time paycheck right away. If this behavior isn’t nipped in the bud, it could instill a bad habit of blowing through their full-time paycheck when they enter the adult world. It’s important to help them understand needs vs. wants and how to plan for what they truly have to spend if they want to live a financially stress-free lifestyle.
One of our favorite budgeting methods is the 50-30-20 rule, and we even have a tutorial to help guide teens and parents through it. Showing teens to prepare a basic budget like this is a key step toward sustaining financial independence.
- The action:
Help your teen develop a budget that clearly shows spending vs. saving. And while you’re at it, consider opening a personal savings account for them. TFNB offers a kid’s savings account for tweens and teens 17 years or younger. And, when they become of legal age, they can transfer those savings to high-yield savings accounts where their hard-earned cash can work for them by earning interest (bonus tip: this an opportunity to teach them about the magic of compound interest).
Understanding where their money is going is a big part of money management skills, so encourage them to keep track of where they spend their money by using an app. Luckily, a budget tracker is built right into the TFNB app, so they’ll have access to it as soon as their account is open.
They're Both Plastic, But Credit And Debit Cards Aren't the Same
- The lesson:
A debit card and credit card may look the same, but teens need to understand how they differ. Explain to them that credit cards are a great tool when used correctly. If not, a credit card can hurt them in the long run if they run a balance higher than they can pay off.
- The action:
Prepare them for their own credit card by letting them borrow money—plus interest—from the “Bank of Mom & Dad”. Don’t have enough cash for those new wireless earbuds? Put them on a payment plan, and if they don’t make payments, ask them to temporarily return the item to you. Help your teen understand that credit extends beyond purchases, and establishing good credit—making on-time payments and maintaining low balances—can help them buy a home or car in the future.
Educate Them On The Cost Of College
- The lesson:
After graduation, college or trade school is right around the corner—along with all of the expenses associated with that next phase of their educational journey. Tuition. Textbooks. Heck, maybe even their first apartment or dorm. If you’re not planning to fund all of their college lifestyle, it’s time to initiate discussions so your kids know how to plan and save accordingly.
- The action:
Help your kids to understand the cost of college by working with them to tally up all the expenses that might be headed their way. Start a conversation about the differences in costs between attending a university versus community college, in-state, and out-of-state tuition costs, and how your kids’ future earning potential will impact their ability to repay any foreseen student debt.
Discuss the amount, if any, you are willing or able to pay. If you’re not covering the full bill, discuss ways your kids can cover their educational costs by working, saving, applying for scholarships, and exploring cheaper college options.
Peace of Mind When You Plan For the Future with TFNB
Graduating from high school can be equal parts thrilling and scary, but having a plan in place for your money can give you peace of mind.
We know it’s easy to rely on our banking app these days, but you shouldn’t be afraid to walk into one of our locations to meet with someone. Our bankers are here to answer questions, you or your teen may have.
If you are ready to open a new credit card, savings account, or simply want to talk to someone about your financial goals, talk to a team member at TFNB. We’re here for you now, and for your future. That is why we’re Your Bank for Life.
If you have any questions or would like to know more about our banking solutions, contact us at 254-840-2836
