Elizabeth Mitchell is a freelance fashion and beauty writer living in Los Angeles. A graduate of New York University, she regularly contributes to The Fashion Spot, The Luxury Spot and authors the Star Style column for StyleBakery Teen. ...
It's never too soon to start educating your teens about proper money management! Our financial experts dish their best tips for teaching the ins and outs.
Don't give your teenager a flat allowance
"Children must develop the concept that money is earned," explains Elle Kaplan, CEO and founding partner of Lexion Capital Management. "An effective method for doing this is to break it down to your child in clear and concise facts. For example, you pay your gardener $30 a week to mow your lawn; if your child would like to do the work they can be the ones to earn that money instead." This helps develop a sense of economics (i.e., different skills have different values), she notes.
Make them budget their own expenses
Planning on spending $200 on back-to-school clothes this year? As opposed to just paying for everything yourself, Tulsa-based financial advisor Tyler Gray suggests letting your teen budget out how they want to spend the money. "Tell them that's how much they have, and when it's gone, it's gone. This will help them to see that money doesn't grow on trees, and they'll start to develop budgeting skills that will be valuable long after they leave home in a few years."
Open a small line of credit for your teen
Of course your teen shouldn't have any debt yet, but why not help him or her begin understanding the principles of a credit card now? Ryan Michler, an investment advisor with Cittica Financial, recommends opening a small line of credit for your teen (think $50-$100 at a bank) to use and pay off — if you can. If that isn't possible and you're willing, you can be the "credit line" for your child. "This way, he or she will learn the implications of payments and interest."
Offer to match their savings
According to Gray, an easy way to motivate your teen (or anyone!) to save is to offer to match the amount of money they put into a savings account up to a certain amount. "This is just like when your employer matches your 401(k) contributions," he points out. "For example, maybe you tell them you'll match 25 percent of every dollar they save. This will give them an incentive to save, plus they'll be excited to do so because they'll reap instant rewards." However, be prepared to fork over the cash, he warns. It won't take long for your teen to realize how valuable your new "matching" program is for their bank account!