Managing finance is basically a way of life; setting priorities, understanding needs and above of all savings. There’s no such thing as managing finance but not saving enough. Financial philosophy revolves around spending less than what a person, a corporation or a country earns. The first lesson on managing finance does not start at school or college but starts at home; in a person’s formative years.
Here, we have outlined some habits that we feel teenage children would benefit from. If saving and financial management lessons start early, a child’s mind is more attuned with financial acumen.
Developing a saving habit
Not too many decades ago parents gave clay “gullak”, the local version of piggy bank to children to inculcate saving habits. This is perhaps the foremost lesson parents can give to a child to develop saving habits and understand financial management. Teenage children can especially be involved during discussions and decisions related to a large expense, such as buying a car or a house. Teenagers can also be involved in saving up for this goal, and the whole family can work towards a particular financial goal for such an expense.
Similarly, when a family wishes to buy consumer durable such as TV, a fridge or even a micro wave, teenagers can help make appropriate choices, by deciding on pros and cons of different brands and models. The lessons during these choices can be related to discounts, deals, and choosing a best value deal that covers requirements, but is also reasonably priced. This would help them to become more conscious of their choices and decisions during adulthood, and not make impulsive purchase decisions. They must learn to spend out of the available and limited resources rather than spend though credit and loans, or making expensive choices that they don’t have the funds for.
Managing pocket money
When kids reach their teens “fix” a pocket money for each month. Pocket money needs to be budgeted and teenagers need to know what liberty they have with this money. When they wish to make a purchase decision, they should be made to save from their pocket money to be able to purchase that item. Similarly, they should be made to realize that they need to harness their expenses such as paying for cell phone bills and eating out with their friends.
The ideal purpose of pocket money is to teach your teenage children to be able to manage their expenses, decide on ideal purchase choices instead of impulsive ones, and to be able to budget. When a request for more money at the end of the month is entertained, this purpose cannot be fulfilled.
Today your bail out can make them can teach them to live beyond their means, and perhaps encourage debt in the future as well. Parents must also realize that scolding or punishing a child or a teenager will not help when it comes to managing their budget. The idea is to teach them financial responsibility and not to scold them on their failure.
The purpose of the expense can also be determined, and this can be turned into a loan related lesson as well. If the parents bail their teenager out of a problematic expense, or cover an expense at the end of the month, they can classify this bail as a loan that needs to be repaid. This can be a good lesson on personal loans and their management.
Open up a bank account
Almost all banks now offer savings account for children below the age of 18. Going up to a bank is itself a good feeling particularly when a person sees his or her savings grow. Encourage this sense of achievement at an early age. Talk to them tell them how this saved amount will help them in the future when they are old enough to buy a laptop, a guitar or a car of their own. Till such time arrive that they have a bank account, a suitable sized piggy bank can serve the purpose. Banks such as HBL and Bank AlHabib readily market their bank accounts for children, but practically all banks in Pakistan provide this facility where the guardian of the child can help open a bank account for the child.
Earning and Saving for Education
Teenagers can be extremely savvy in finding avenues to earn money on their own, which they can use to supplement their pocket money, or can add to their bank account for future expenses such as higher education. Promote exploration and curiosity in your teenager to find avenues that they can use to augment income within the household, and manage their own expenses. It will inculcate a sense of responsibility that can help them in their adulthood. If they are managing their income, budget, and their expenses, they can also certainly plan their larger expenses in the future such as their higher education, purchasing a car or a bike.
Although credit cards are not recommended for teenagers but exceptions should be made for cases of emergency or incidents. There are however few things that must be cleared before cards are handed over. They must know the limit of spending and that timely monthly payments are their responsibility. Whatever they spend will be deducted from their monthly allowance. However, if expenses are those that relate to the household, a threshold and type of expense should be pre-decided so that at the end of the month, no surprises pop up. If you are debating which credit card to choose, you can use our card comparison tool for handy reference.
Children imitate their parents. If they see their parents’ conscious for money they will be conscious too. If they see their parents making impetuous decisions in money matters likely are the chances they may follow their footsteps when they grow up. Set good examples and your teenagers will follow!