How to Set Up a Realistic Financial Plan for Teenagers
Brought to you by: Breez DeGuzman
If you have a teenager, you know that they’re not exactly the most frugal creatures on the planet. Most have not had to work for their money while growing up, so they may not appreciate money as much as adults who know how hard it can be to come by. And with the peer pressure they face today to have all of the latest and greatest clothes, gadgets and entertainment, it’s no wonder that money seems to burn a hole in their pockets.
It may be tempting to let them carry on with their carefree spending habits. But doing so would be a disservice, as these habits tend to stick with them into adulthood. It’s much better to help them set up a financial plan during the teen years so that they may learn responsibility before they are out on their own.
Saving and Investing
One of the most important things a teenager can learn about money is the importance of saving a portion of her earnings. This will allow them to build up an emergency fund. It can provide a way to buy big ticket items without having to go into debt. And it gives them money to invest.
Investing isn’t usually a top priority for teenagers, and it’s even a foreign concept for many adults. But getting started early is the best way to ensure a comfortable retirement. It can also provide some passive income in the years to come, reducing worries about unemployment or failing health.
Teens need to be encouraged to save and invest a certain percentage of everything they earn. Doing so before putting money toward anything else, even bills, will make it easier and more consistent.
Paying Bills and Buying Necessities
Once your teen has put some money into savings and investments, the next order of business is to pay monthly bills. Teens do not generally have as many of these as adults, but they may have a cell phone plan, car insurance or other recurring bills. These should be paid before any other spending takes place.
Next, teens can buy the things they need. Parents often cover some of their teens’ needs, but they may leave expenses such as school lunch, clothing and gas for them to pay. This provides good practice for the day when they start buying everything for themselves.
Discretionary Spending
Once the savings, bills and necessities are taken care of, it’s time for the fun part: discretionary spending. This tends to be the favorite part for most teenagers (and adults, too). But it’s important not to let your child get too carried away with it.
There’s nothing wrong with kids having some fun with their money while they’re young, but try to discourage them from spending every penny just because it’s there. Making a list of the things they want to buy can help. If there’s not enough money to buy them all and have some left over in one month, they can always be carried over to the next.
A realistic financial plan for a teenager contains all of these elements. This will give them some freedom with their money while also providing structure. And it will build the framework for responsible money management as an adult.
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Tags: Buying Necessities, Discretionary Spending, Financial Plan for Teenagers, Paying Bills, Realistic Financial Plan, Saving and Investing, Things About Young People
