Are you worried about how much money your teen spends or their inability to save? If so, you're not alone. Here's what you need to know to help teach your teen money management and the value of money.
The importance of teaching teenagers about the value of money
It is important to teach teenagers about the value of money for a number of reasons. First, it can help teens develop good financial habits that will last them a lifetime. Second, it can help them avoid making costly financial mistakes and third, it can help them reach their financial goals, such as saving for college or retirement.
Currently, 54% of teens say they are worried about financing their futures, according to a survey from Junior Achievement USA and Citizens Bank. Yet, data from the the Financial Industry Regulatory Authority’s Investor Education Foundation, which seeks to promote financial literacy, reveals high school students who take personal finance courses have better average credit scores and lower debt delinquency rates as young adults.
The study also found “notable improvements” in credit outcomes for 18- to 22-year-olds in three states — Idaho, Georgia and Texas — where financial education mandates are considered rigorous by the Council for Economic Education.
How does financial education help teach your teens the value of money?
Financial education can teach your teens the value of money in several ways:
It can help them to understand the basics of personal finance, such as budgeting, saving, and investing.
It can help them to develop good financial habits, such as identifying needs versus wants, resisting impulse purchases and avoiding debt.
It can help them to make informed financial decisions, such as choosing the right bank account or investing in savings and a pension plan.
Louise Hill, COO and Co-founder of GoHenry agrees: "At GoHenry, we want to help make every kid and teen smart with money, so they understand delaying gratification and money management basics around spending, saving and investing."
How to teach teenagers about the value of money
Encourage them to get a part-time job
Teens can learn a lot about the value of money from getting part-time work A job teaches them about commitment (they won't get paid if they don't go in), the value of their time (how much is their hard work worth to others?) and that what you are paid isn't what you take home (national insurance and taxes are deducted).
If part-time jobs are hard to find, consider other ways for your teen to make money, such as adding tasks and chores for weekly pocket money. This will teach them the value of earning and how hard you have to work to get paid.
Explain how earning relates to spending
Associating their time and effort with pay is a key lesson for teens in understanding the value of money. Nothing will bring the message home faster than showing teens how their earnings translate into buying things in the real world. For example, if they earn $10 an hour, point out that:
A $20 pizza isn’t $20; it's 2 hours of their time.
A pair of sneakers isn't $110; it's 11 hours of their time.
A new phone isn't $400; it's 40 hours of their time.
If they were paying $600/month for a flatshare, that's 60 hours of their life every month (7.5 days of work each month).
Set goals around savings
The latest study on teens shows that US teens spend the most money on clothing (20%) and food (19%) and on average, a US teen spends $44.8 per week ($26.9 from parents and $17.9 from part-time work).
So when your teens mention wanting driving lessons, days out, or high-ticket items like Nike trainers, suggest ways for teens to save and show them how to automate their savings.
Make them pay for their own items
Nothing brings home the value of money faster than paying for your expenses. Making teens pay for their own items like headphones, phone bills and or Spotify teaches teenagers the importance of budgeting their money. It shows them that money is a limited resource, so they must plan and think about their needs versus wants.
Be a good role model
Teens learn by watching the adults in their lives. If you want your kids to be good with money, you need to be good with money yourself. Don't let them see you making impulse buys on credit, buying things you never use or wasting cash. Instead, talk to them about prices, and whether items are worth the money, so they get used to questioning what they spend their money on.
Have honest and open conversations about money
At a certain point, your teens can handle the realities of the household budget. Let them know how much money is spent simply running the house and show them the cost of the mortgage/rent, utilities, broadband, and grocery bills. It can be an eye-watering experience for teens to see how much of your money must be allocated to needs before thinking about everyone else's wants.
Let them make financial decisions and weigh up the pros and cons
One of the best ways to teach teens about the value of money is to give them space to make their own financial decisions with their money. Beth Zemble. VP for Education at GoHenry agrees. "To encourage spending wisely, allow teens to spend their own money on items they want. If your teens want the latest fashion trend or video game, prompt them to use their own savings or income. Often, they'll decide to forgo the item if they have to pay for it."
Moreover, making their own financial decisions will also help them learn from their mistakes such as (overspending so they can't afford to go out), which will help build confidence so they can make more significant financial decisions when they start working or go off to college.
Involve them in financial decisions
It also helps to involve teenagers in financial decisions in the home, around spending and saving so they can see money is a limited resource. For example, does your family need all the subscription streaming services you have? How can you cut back on everyday items to save more for vacations? Where do they think money is wasted in the house?
Talk about money-saving tactics
Showing your teens a range of money-saving tactics like thinking before you buy, using comparison sites, and utilising vouchers and discounts will show them how to get more value for money. This is helpful for teens because when they realise that money doesn't go as far as they want but see that they can save money by shopping smartly, they learn the importance of delayed gratification and financial responsibility.
Encourage long-term investments
Talk to your teens about long-term investments, which can help them understand the value of money over time. Explain compound interest so they see how their money can grow and how important it is to make smart financial decisions. This helps them understand that money is a tool that can help them achieve their goals and live the life they want.
How can GoHenry help?
GoHenry is a prepaid teen debit card that can help teens in several ways. Not only does it give teens the independence to use a debit card in the real world, but it also helps them learn about the value of money and how to make smart financial decisions. It also teaches them about money management and the importance of tracking their spending and allows them to set savings goals.