If your teen is anything like most teens, you’re probably losing a lot of money to V-Bucks and new, trendy clothes, these days. Also, if they are like most of their peers, they know very little about the important financial concepts that are extremely relevant to them right now. Since it wasn’t too long ago that I was in their shoes, I’m hoping to help bridge the gap.
Here are SIX things that your teen needs to know RIGHT NOW:
- FOMO will leave you penniless.
- The “Fear of Missing Out” is, in my opinion, the #1 cause of… well… not having money. A lot of times the media and simply the people around us influence us to purchase unnecessary items that we really don’t want. Honestly, before you make a purchase, ask yourself why you want to buy it and does it have any real function FOR YOU. I should note that FOMO is also the the leading cause of poordom (immense boredom due to the lack of funds to afford anything fun).
- Pay yourself first.
- The most important part of your budget is saving. Don’t decide where you want your money to go then throw the rest to savings; decide how much you want to save, then work with the rest. Also, I hate to break it to you, but your piggy bank is probably not adequate for your savings anymore. It’s time to grab a hammer and head to the bank.
- It is NEVER too early to pay toward student loans, even if they are deferred.
- Many people with interest-deferred loans decide to wait until the end of their grace period to start making payments, but that is wasting prime payment time. When the grace period ends, interest will begin accumulating and you will end up paying much more in the long run. The best thing to do is make payments while you are in school. By paying as little as $20 bi-weekly, you’ll knock $2,000 off your student loans! It may not seem like much, but you are avoiding any interest being added on to that amount, later.
- You should have paid attention to the lesson on compound interest.
- Compound interest can and will have a major impact on your life; you get to decide if that impact will be positive or negative. Investing early allows your money to compound more times than it would if you wait, leading to more monetary gains. However, compound interest, when it comes to credit cards and loans, can leave you checking the sofa cushions for spare change. That can be avoided by making payments on time and in full.
- Credit cards ≠ free money.
- Period. I don’t have anything else to say about it. Just let those words sink in. You have to pay it back.
- Length of credit history matters.
- If you can start building credit now, it will help you in the future. Although it isn’t one of the largest factors that affect your credit score, the length of time does have an impact. Think about getting a credit card to pay for little things that you would normally buy, like gas. Doing so will improve your credit score due to your on-time payments and length of credit history.
The last thing I want to say is for you: Be transparent; share your financial situation with your kids. A lot of what we learn about personal finance is through trial and error. Show them what you do and tell them why, including- no, ESPECIALLY- your mistakes. With those details, your kids will be more prepared when the situation comes their way and they’ll remember what you said about it.
Even if they don’t say it out loud, they will thank you for it.
Until next time, make good decisions!