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7000 Peters Creek Rd., Roanoke, Virginia
1-866-260-5994 |
CCCS of Southwest Virginia |
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How to Teach Teens the Value of a Dollar |
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By Jill Gianola • Article appeared at ivillage.com
Teens figure they must know a lot about money. After all, they spend more than $100 billion of it every year, and many even earn part of that. The reality is that they are woefully short on the knowledge and tools they need to manage their own money.
Teaching your teen about money is really preparing them to be responsible, self-reliant adults. Here are five great money skills for teens:
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Manage a Checking Account
If your child receives a paycheck or is going to college, she should have her own checking account. Shop for one with the smallest balance requirement and the lowest service charge. Balance the checkbook with her for the first few months. And make sure she understands about fees for bounced checks and how to report a lost checkbook.
Prepare and Follow a Spending Plan
If $100 running shoes don't fit in the family budget, but your child insists that his social life will shrivel without them, set up a clothing allowance.
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Calculate a reasonable amount for a year's worth of clothing and dole it out in quarterly chunks. If your child overspends, he can stop buying or add his own money. For college-bound teens, work out a month-by-month spending plan with them and then have your child track expenses. A pencil-and-paper system works fine, although some teens prefer computer programs like Quicken.
Understand Credit
The typical teen receives a steady flow of credit card offers and yet knows very little about how they work. Here are the essentials:
- Every time you make a purchase with a card, you are taking out a loan.
- There is a high price for this loan; it's called interest. If you make minimum payments, you will take almost eight years to repay a $1,000 purchase on a card charging 18 percent interest.
- The only way to avoid interest is to pay the full balance each month. Except for true emergencies, that's what should happen.
- One credit card is enough.
Start your teen off with a debit card on his checking account or a second card on your own account.
Manage a Paycheck
Teens learn a lot about responsibility and independence by holding down a job. They also see how taxes shrink their take-home pay and how many hours of work it takes to buy a car or a new outfit. Just be careful it isn't too much of a good thing. School should be the first priority, so put a limit (say, 10 to 20 hours a week) on outside work.
Save and Invest Wisely
When it comes to investing, teens have a huge advantage over their parents: time. The magic of compounding is dramatic when you start saving young. A 15-year old who invests $2,000 a year in a Roth IRA for just 5 years (until age19) will have almost $1 million tax-free at age 65.
Diversified no-load mutual funds, such as the Vanguard Total Stock Market Index, are great choices for Roth IRAs. T. Rowe Price will allow you to start an account for $50 a month.
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CCCS, A Division of Money Management International
Regional Headquarters - 7000 Peters Creek Rd., Roanoke, Virginia
Corporate Address - 9009 West Loop South, Seventh Floor, Houston, TX 77096 |
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