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What your teen needs to know about finances

As a stepmom, I’ve helped my husband raise two girls through middle school, high school and college. It wasn’t always easy, but I’ve certainly learned a lot, and my two younger children are reaping the benefits of both our triumphs and mistakes. The second time around, we’re doing some things the same — and some things very, very differently.

One of the most important things we tried to teach my stepdaughters was how to be financially independent. (I won’t lie — this lesson was as much for our sakes as for theirs!) Now that they’re grown and on their own, here are a few lessons we’ve learned that worked.

1. Teach your teen about the true burden of student loan debt after college

News stories abound online of young adults who’ve had to move back home after college because they simply couldn’t afford to pay back their student loans and live independently. Unfortunately, most teens don’t realize the effect student loan debt can have on their post-college lives until they’ve already accrued it. Ambitious, hardworking students will find success no matter which college they attend — I know this both as a parent and as a (debt-free) graduate of a state university. Make sure your kids don’t get sucked into the myth that their future happiness hinges on whether they attend that $60,000-per-year private college versus the much cheaper state university. Is your child already dealing with student loan debt? Chase has some steps he or she can take to get that debt on track.

2. Help your child open his or her own checking account at the age of 16 and make sure all allowance and job earnings are deposited there

I opened a checking account as soon as I started driving. My parents deposited any money they gave me into that account. It was a great way to learn how to balance my checkbook and budget my money in real time, while my parents were still around to help me out. Check out these tips on when (and whether) to think about a checking account, savings account and credit card for your teen.

3. Make your child earn money for big-ticket items and buy them on his or her own

My children (ages 8 and 12) both yearn for the fancy iPads and iPhones many of their friends have — I’ve told them both they can have them as soon as they save up and pay for them. I know they’ll appreciate the expense and take better care of their electronics if they save for and buy them themselves. We made both my stepdaughters raise money toward buying cars at 16 as well — and when one totaled her car, she had to walk to and from work all summer long until she could save enough money to buy another one. I know for a fact she’s a much better budgeter today than she would have been had she not had to earn some significant “wants” on her own.

4. Try to restrain yourself from buying luxury brand items for your child

This is a lesson I learned from my own experience as a teen. I was raised in a family of means and had designer everything when I was growing up. I didn’t realize that my living standards were unrealistic until I was on my own and working my first job, which paid all of $17,500 a year! Going from first class to bargain basement as a young adult is hard — and it ends up landing too many young people in debt. I also missed out on the sense of accomplishment I would have had when I could finally afford a nicer car or handbag or even brand of shampoo on my own — because I already had those things as a teen.

As a parent, I want my kids to have nice things — but I make sure that what they have isn’t too different from what they’ll have when they’re on their own for the first time. This leaves them something to work toward and look forward to (if certain luxury items appeal to them) as adults.

5. Replicate the adult financial experience for your child any way you can

In addition to the checking account, you might want to open a savings account in your child’s name and encourage him or her to deposit a percentage of earnings from each summer job’s paycheck. Perhaps you could help your child use Grandma’s Christmas check to invest in the stock market. Already, my husband often shows our kids his paycheck and bills and they both know what percentage of his earnings go to taxes, what percentage goes to health insurance and how many monthly expenses take away from his earnings. Another idea? “Moving Out Camp” for teens.

Want more advice? JPMorgan Chase is committed to improving not only your financial fitness, but also that of your kids. For many more helpful financial tips for young adults and teens, check out their Financial Fitness website.

This post is part of a sponsored collaboration between Chase and SheKnows

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