After years of teaching your children the value of a dollar, the teenage years offer a unique opportunity for kids to put financial concepts into practice.
High school is an excellent time for kids to get to know banking products and learn the basics about credit. A strong understanding of key financial ideas can help set your child up for success later in life.
Looking for ways to cultivate financial responsibility in your teen? Here are a few tips to help you get started.
- Encourage teens to open a checking account.
Before your teen clocks in at their first job, make sure they have a checking account where they can safely deposit and manage their earnings.
Some checking accounts offer features specifically for teens, like WaterStone Bank’s Student Checking Account. This type of account empowers your child to get comfortable with digital banking. Using a debit card also helps teach financial responsibility as kids learn that swiping plastic doesn’t mean “free money.”
Plus, student-tailored accounts can offer peace of mind for parents with safety features like overdraft protection and ATM fee reimbursement.
- Learn about loans.
If your teen will be applying to colleges, help them understand what it means to take out student loans.
Review the differences between private and federal student loans, and use online loan repayment calculators to help bring the numbers to life. Let teens see how much their monthly payments could be for different amounts of loans.
Then, help your child put those numbers into context: How does a monthly loan payment compare to a car payment, for example? How much might they expect to spend on rent? How could taking student loans today impact their finances later in life?
Related article: Financial Lessons for Teens and College
- Give teens confidence with credit.
Many teens—and adults!—are fearful of credit cards. But credit is a powerful tool when used responsibly.
Consider encouraging your teen to open a credit card with a low limit. Explain that a credit card doesn’t offer “free money”—instead, they should plan to pay off their credit card bill in full each month to avoid accruing interest.
Look for a student-focused credit card that offers perks or cash back. And remember, you might need to open the account with your child, since they don’t have a credit history of their own. This also creates an opportunity to impart on the importance of building a good credit score and credit history from an early age.
Related article: Lessons About Credit