Today, a lot of kids are raised in homes where they have access to money, cars and gadgets. A lot of these are taken for granted, which sets kids up with a kind of mindset where they just spend money on the newest thing without a second thought.
As a parent, you should teach your kids how to handle money before they become adults. You wouldn’t want your son to rack up thousands of dollars in debt while in his 20s, right? You have to nip that in the bud and teach them money-management skills early so that they’re secure later in life. I mean being frugal is an important life skill…
In this article, we’ll look at how you can teach your teenager to become frugal with their finance.
Here are the top 5 ways you can teach your child to become frugal with their finances.
1. Save More and Spend Less
Saving can make your teenager financially independent in life. Make them understand that they can’t rely on the Bank of Dad and Mom for eternity. Saving provides financial backup against emergencies.
If your child does not have a bank account, get one opened for them. If for some reason, it can’t be opened, get them a money jar to practice their saving skills.
It takes discipline to save and not spend all that is available, which is why you should give your child a savings incentive or a reward for setting aside a portion of their weekly paycheck. You can even add to what they save in a percentage like add an additional 50% of what they save each week.
For instance, you could ask them to save up half the amount it would cost to get them a vehicle, gaming console or laptop—and you’ll cover the other half. You could also do the same with their college fees and many more expenses.
2. Understanding the Difference Between Wants and Needs
This is one area where a lot of people get it wrong. Most teenagers spend money on things that they want and not what they need, often wasting money.
As a parent, you need to make your kid understand that the term “need” is something that is required to survive.
Whereas, “want” is something people desire to have, that they may not need but buy anyway.
To save and spend money wisely, every child must understand the concept of needs and wants.
3. Avoid Impulse Spending
An impulse buy is an unplanned decision to purchase a service or a product based on an emotional impulse. This is why when most teenagers receive money, they often blow it all on impulse buying things they don’t need, to impress people who don’t care about them.
This is a trap that teenagers often fall into.
As a parent, you don’t want your child to be an impulse buyer. Your kid needs to know how to manage money and stay away from spending too much on the latest gadgets, trendy fashion, eating out and more.
4. Let Them Pay Their Internet and Phone Bills
Being a frugal person takes a lot of discipline which can be taught at home. As long as your kid receives a weekly paycheck from you, they need to be financially responsible and resourceful.
Instill within them the habit of paying their internet and phone bills by themselves.
The quicker your child learns to be resourceful, the sooner they’ll be financially stable and frugal.
There is this confidence that comes with paying bills yourself. For your kids, let them start with internet or phone bills or both.
5. Use a Budget
A budget helps you to pen down the things you can afford according to your means. It makes you understand what’s important and how to allocate your funds so you can reach your financial objectives without breaking the bank.
You don’t have to wait until your child requires a financial intervention before you teach them how to spend on a budget. Help them create a list of all their weekly or monthly expenditures and weigh them by importance, then list their weekly or monthly allowance or income if they are working. They need to make sure their expenditures are less than what they have coming in. Don’t calculate savings into their budget, because that’s not a source of income.
- Budgeting gives you control: Your child needs to know that budgeting will give them total control over their money. Knowing how much allowance you’ll get at the beginning of a new week, together with a budget will help them become smarter spenders.
- Focus on the bigger picture: To budget, one needs to plan. If your kid puts a bit of effort into staying within their budget, they’ll eventually build up savings for when they want to make a bigger purchase.
The Bottom Line
Being frugal means putting needs before wants and keep your spending below your income. With kids, start slow. Give them an allowance as well as some financial responsibilities like smaller bills they have to pay. A huge part of frugality is understanding the things that are important to you and those that are not. Starting early (at 5-6 years old) will set your child up for financial security long-term.