As with other life skills, financial responsibility is something you can teach to your teenage child. As a parent, you'll want to guide them on essential life skills like budgeting and saving, along with developing the right mindset for setting goals and assessing purchases.
1. Give them responsibility
When it comes to money, allow your teens some discretion and independence. This gives them the space they need to learn how to be responsible and accountable.
- Pocket money - Giving your teen pocket money could help them learn about making smart saving and spending decisions. Making pocket money conditional on completing household chores is a great way of doing this.
- Bank account - Helping your teen set up bank accounts and savings accounts could help them learn about tracking savings, earning interest, and reading bank statements.
- Jobs - A summer job or casual employment could give your teen an opportunity to learn about making money, saving for purchases, tax, and super.
- Purchases - Don't give your teen everything he or she asks for. Instead, expect them to save up for certain wants. If your teen wants a new gaming console, sneakers, or bike, help them set savings goals and encourage them to work towards buying the item themselves.
2. Encourage budgeting and saving
Keeping a budget or spending plan is an effective way to become financially responsible. With a budget, your teen can learn to plan for expenses, control their spending, make smarter spending choices, and meet savings targets. They can learn about allocating fixed amounts for things like fun and entertainment as well as savings.
Key things to teach your teen include making accurate and realistic projections, tracking expenses, tax, and savings. Guide them on setting aside a percentage of their income or pocket money for savings. You can suggest using easy budgeting tools like apps, spreadsheets, or paper notebooks to track everything.
3. Demonstrate how to set and achieve financial goals
Lead by example and demonstrate to your teen how they can achieve goals. You could do this by involving them in your household budget planning process. You can also assist them with setting their goals and tracking their savings with a savings account, whether they're saving money for a new phone, computer, or other item.
4. Instil price consciousness
Talk to your teen about prices, doing product research, and opportunity cost. This could help them learn about the value of money and encourage them to make wiser spending choices. For example, you could highlight how spending $500 on a designer item could be irresponsible by reminding them how many hours they'd need to work to earn that money, or by working out what else they could buy with $500.
5. Take every opportunity to talk to them about money
Real-life situations offer wonderful opportunities to learn about financial responsibility. Take the chance to speak to your teen about money when you’re doing everyday things.
- ATM - At the ATM, explain how you work out how much you need in cash and how you track this in your budget.
- Supermarket - When out grocery shopping, chat to your teen about comparing prices, using a shopping list, and keeping to a budget.
- Bills - Explain how you use your budget to plan for paying bills and other recurring expenses.
- Mortgage, credit card, and loans - Help them understand how loans work and how they can be useful in the right circumstances, but explain the risks of credit cards and debt.
6. Focus on the bigger picture: financial freedom
Remind your teen children about the bigger picture: the positives of achieving financial freedom. While it's important for them to learn about the risks of abusing credit and overspending, help them understand that the discipline of financial responsibility comes with the reward of achieving personal goals. These could be a new car, holidays and travel, or other wants. If they see money as a useful tool (rather than something to be overly cautious about), they could be more likely to have a positive relationship with it.
7. Choose the right super fund
Starting super at a young age could give you teen a huge wealth boost. Make sure your teen understands how super works as well as things like government co-contribution incentives. Choosing the right super fund - designed for young people with lower balances - could also help your teen avoid having their super eroded by fees. Other features to consider include investment options, performance, and service.
Financial literacy and responsibility are essential life skills you, as a parent, can help your teen develop. Providing space for responsibility, showing them the benefits of budgeting, and encouraging them to be thoughtful about prices and purchases are excellent approaches. You'll also want to help them choose a suitable super fund and take every opportunity to talk to them about money. By showing them that money is a positive tool to be managed, you can encourage a healthy attitude towards spending and saving.
At Student Super, we understand that parents only want the best for their child’s future. With our tips, information and friendly team, you can trust that with Student Super, your super does the saving for you. Get started today.
