You have probably been teaching your child about money since he or she was young, but the teen years are a time to get serious about making sure your child has adequate financial knowledge before becoming an adult. The more your child knows and understands about money, the more likely he or she will make wise decisions in the future. Read on for five things your child needs to know about money.
Savings and Investing
If your child does not already have a savings account, now is a great time to open one. Your child needs to understand the importance of savings from an early age. Begin showing your child how to create a budget and how to always put a percentage of his or her earnings into a savings account. Go over bank statements with your child so that he or she can see how interest makes money grow.
You can also begin to teach your child about investing. If your child is not ready to put actual money into stocks, there are many simulation games online to teach your child how the stock market works.
Debt and Credit Cards
Once your child turns 18, he or she may be tempted to open a credit account. In order to avoid accruing debt, your child needs to understand how credit cards work and see how much he or she will be paying back in interest. Look over credit card charts with your child so that he or she can see exactly how much interest rates make you pay back.
As your child is nearing time to enter college, you will likely be thinking about how to pay tuition. Now is the time to begin looking at student loans with your child and finding the one that will work best for your family. Make sure your child understands that a student loan is something they will be paying back for many years and getting the right loan and interest rate is essential.
Sometime in the next several years, your child will likely be taking out a car loan. Make sure your child understands the types of car loans and how interest rates vary based on the length of the loan. Look at charts so that your child can see that while a longer lending period yields a lower monthly note, it also leads to higher interest and more money paid overall.
Just as with purchasing a car, your child needs to learn about the different types of mortgage options he or she will have when getting ready to purchase a home. You may want to begin with a discussion of how a home is an investment and look at the difference between buying and renting. You can then look at mortgages and interest rates. Discuss finding a balance between interest rates, monthly payments and payoff periods.
With time and instruction, your child can have the he or she needs to move into adulthood and make financial decisions with confidence. Give your child chances to experiment with money and learn how finances work and he or she will be ready to make educated decisions.