What your teen should know about money

Don't send your teenager into the world after high school graduation without a solid grounding in financial training and personal accountability.

Today's teens know how to spend money but little about managing it. Financial experts estimate that the average college student graduates with $13,000 or more in student loans to repay. That is a bad way to start out in life, which often leads to a poor credit rating and even bankruptcy for some new college graduates.

Just as we raise our kids to know right from wrong and to appreciate the value of a decent education, it is just as important to train them in money management. Few parents do this because they themselves do not know how to handle money or they don't know how to share that information with their teens. The following tips might help:

1. Enroll them in a financial planning seminar. This can be as basic as a school-based domestic arts course that includes household budgeting. Not all schools have this type of course, so you may need to look for one at the local community college or at your church. If these don't pan out, check the library for books about kids and money. These books are proliferating, so you should be able to find an affordable one (or two) in the neighborhood library or bookstore.

2. Set up a household budgeting system that they can understand and follow. Some parents use allowance as a way of regulating kids' behavior and chores. Other parents prefer to separate allowance from housework. Whatever your preference, kids need to know from a young age that they are expected to contribute to the household upkeep and that regular contributions can earn dividends, whether as paid allowance or special privileges. If they do receive an allowance, insist that 10% go to a savings plan for long-term purchases, with another 10% going to a charitable cause of your child's choice. They may be church, a hungry children's campaign, or a neighborhood charity.

3. Set a good example. Parents need to follow a budget and set up a savings plan that brings adult-level rewards like a new car or a family vacation. When kids see parents get into debt, they feel it is all right to do so and will likely follow in their parents' footsteps. But prudent parents are just as likely to have kids who follow their example. So provide good direction and leadership for your children.

4. Help them open accounts. By the age of 16 or so, depending on a teen's maturity, he or she may be working part-time, even if it just over the summer, and may have received cash gifts for birthdays or holidays. This money, along with allowance, should be budgeted into proper channels. By the mid-teens your child should become responsible for budgeting money for his or her own clothing, school expenses, entertainment, and transportation. Parents will need to provide this money, of course, and then show the teen how to allocate it through use of a checkbook and savings account. By the time the child graduates from high school and perhaps goes on to college, he or she should be able to sensibly balance a checkbook and proudly display a sizable savings balance.

5. Supplement their efforts. As your children master important financial concepts, you may want to reward or support their goals. For example, some parents match dollar for dollar what a teen can save for a car. For example, some teens might save $1,000 and receive another $1,000 to buy a $2,000 car, and so on. The same could go for college unless parents wish to provide this gift for their children who responsibly study and pass courses. It helps for children to learn that good behavior in the financial realm can lead to additional benefits.

Teaching your teens firm principles about money management is one of the best gifts you can bestow on your child before he or she leaves home. If you're not sure where to begin, visit one of the many online financial Websites, many of which offer lessons for kids and teens. You also can pick up a book or magazine at the library or bookstore. Share these with your children and change their lives!

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