If you have a pre-teen, you might be trying to teach them how to make the best financial decisions. This is likely especially true if your pre-teen just started acquiring financial responsibilities, like paying bills or buying things for themselves.
Before you set them loose and let them go out to buy a new pair of shoes or their first car, you’ll want to teach them a bit more about how money works and how to use it responsibly! Our guide will help your pre-teens make better financial decisions.
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The importance of finances for teens
Whenever financial literacy is discussed, it often focuses on teaching financial skills to adults. However, financial education should be a part of our children’s lives as well, and teaching them about finances before they graduate high school could change lives.
Children who learn financial lessons in their pre-teens are more likely to grow up to be financially savvy as teens and adults. Plus, setting your pre-teens up for success now can make their lives a lot easier in the future.
Financial literacy will ensure that your children always have enough money to cover their expenses as well as the costs of various emergencies. Teaching them valuable lessons about money will last a lifetime. So, let’s talk about how money is made!
Understanding how money is made
When it comes to teens and money, there is great value in teaching them how money is made and how they can receive money as a result of providing a product or a service. You might choose to do this by giving your kids books that will teach them all about these concepts.
Another way to teach your children about how money is made involves paying your children for doing their chores or teaching them how to determine a reasonable price for a product or a service. As a fun activity, you could encourage them to develop a mock small business, or if they’re old enough, try suggesting that they apply for a part-time job.
Balancing a budget
Once your pre-teen starts making money, one of the most important lessons you can teach them is how to budget their money. A great way to do this is by showing them how to open a RoarMoney account, which will help your pre-teen track their spending and analyze their spending habits.
By using a financial tool like a RoarMoney account, your pre-teen will be more likely to develop the habit of being aware of how they’re spending their money. Plus, it’ll show them just how quickly money can disappear when you don’t budget.
Paying an allowance
Many kids start asking for an allowance in first or second grade. When they do, there are three main questions you should ask yourself. Some of these questions include when to start, how much to give them, and whether the allowance is linked to household chores.
According to the Parents Network, there are two different approaches that you can take when it comes to distributing allowance. Depending on what feels right for your parenting style and your family dynamic, the two different approaches include a chore-based allowance or a repeated allowance.
- Chore-based allowance– By this point in time, your child will have already been doing chores around the house, and their household responsibilities will probably increase over time. But when you start paying them for doing their chores, you will be teaching them an essential financial lesson because it shows kids the value of working hard for what you want.
- Repeated allowance– In the repeated allowance system, the child doesn’t have to do anything in order to receive their allowance. Instead, they’re provided with a specific amount of money at the same time every month. The goal of a repeated allowance is to teach money management skills to your child while fostering a positive attachment to money, maintaining consistency, and building trust.
The general rule of thumb when thinking about how much money to give to your children as an allowance is to equate it to how old they are. For example, if you have a 9-year-old child, then according to this logic, their allowance would be $9 per week.
However, there is no right or wrong answer when it comes to deciding on how much money your child’s allowance will entail. At the end of the day, it’s always important to select a number that makes sense for your family’s financial situation.
Time to save
Similar to setting an allowance, there’s no magic age at which you should start teaching your child about saving or when to open their first savings account. Even so, it is wise to open a savings account for your child when he or she has more money in their piggy bank than you feel comfortable leaving around the house.
An excellent way to introduce your child to the concept of a bank is to explain that banks keep our money safe and pay us interest. It’s important to talk about banks in a way that even younger children can understand, especially with the safety and security part.
Kids should also be taught how we get paid interest from the loans that banks make to other people and small businesses. But try not to overload them with information. A more detailed conversation about how compounding interest works should probably wait until adolescence.
Suppose you want to show your kids exactly how a savings account works. In that case, you can use the Safety Net features of a MoneyLion account. MoneyLion gives your pre-teens access to a one-stop financial solution that will help them save for tomorrow.
With MoneyLion, funds will be transferred into your child’s Safety Net account, which is very similar to a savings account. When they need to access their Safety Net account, your child will simply need to click the “Use Safety Net” button in the app, which will allow them to transfer the funds they need into their main account.
Preparing to pay for college
College costs are rising, and college-bound students are not always prepared for the reality of having to spend their own money on the things they need. In fact, only 1 in 3 students has at least $1,000 in their savings account.
By teaching your child the reality of how much college costs and how to start saving for their expenses at an early age, they’ll have a good chunk of change in their savings account when it comes time for them to enter college. If they start saving now for college, they’ll have a sizable amount of money to spend later on, even if they only add a small amount of money to their savings account each week.
Set your pre-teen up for success today
When it comes to teens and money, taking the time to teach your pre-teen important financial literacy skills now will pay off later on, as they’re less likely to struggle during financial emergencies. Plus, they will likely make better financial decisions throughout their lives as a result because they will have a healthy financial foundation.
To help your pre-teen prepare for financial independence, sign them up for a RoarMoney mobile bank account. With MoneyLion, your pre-teen will learn how to budget, and RoarMoney can even help them save money by automatically adding money to their savings account every time your pre-teen deposits money!