8 things to teach your teenagers about money and wealth

Teaching your teenager a few simple lessons about money and wealth is a huge gift, and one that will keep on giving his whole life.

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  • Teaching your teenager a few simple lessons about money and wealth is a huge gift you can give him and one that will keep on giving his whole life.

  • You can help your child have a less stressful, more prosperous life, by instilling these basic financial principles:

  • Live within your means

  • According to a recent household credit card debt study, the average American household carries over $130,000 of debt, and over $15,000 of that is on credit cards. Some debt is inevitable, but too much badly managed debt is at the root of many personal financial crises. Often, long term money problems are more about debt than income.

  • For example, take two young adults on the same income. One decides to live within his means, and the other decides that debt can fund any lifestyle he wants. Which do you think will have bigger financial problems in the future? Feel free to discuss this with your teen. It will help if you pull out a calculator and actually do the math.

  • Or use an online credit card calculator to show your teen how long it can take to pay off big purchases made on credit.

  • Practice delayed gratification

  • This is the key to living within your means, and something that's not always taught to young adults. Sometimes you have to wait (and save) for what you want.

  • Once you've used the above calculator to see how long it will take to pay off purchases (and how much extra you'll pay in interest), talk about how long it will take to save for the same thing. Work out exactly how much money you can save by buying outright as opposed to using credit.

  • Learn to budget

  • Setting a budget and sticking to it is a basic financial skill all teenagers need. Whether you give your child an allowance, or they make money from part-time work, teach them to take their monthly money and assign it to specific things they need, including a savings account.

  • Be adaptable

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  • An old proverb advises us to cut our coat according to our cloth. Sometimes we have more cloth than other times. Surviving in an uncertain economy often depends on your ability to adapt to circumstances.

  • Teach your teenager that when income goes down, expenditure should too. This may not be permanent. Most people go through hard times. Getting through the hard times is easier if you can change your spending habits and rein in your outgoings when necessary.

  • Value the non-material

  • One of the simplest ways to feel happy and fulfilled on a tight budget is to learn to value things that money can't buy. If you can raise a teen with a deep spiritual life and a non-material outlook, you're giving him a gift that will last his whole life.

  • Many teenagers are materialistic. Don't expect too much. But teaching your child to value his family, faith, friends, nature and other non-material things will support him in making sound financial decisions for years to come.

  • Distinguish between needs and wants

  • Some grown men and women still have problems defining what they want and what they really need. Discuss the difference with your teenager, and stress how important it is to take care of needs first and prioritize wants.

  • Understand the difference between assets and liabilities

  • Again, many adults don't truly understand this distinction. They refer to their house as an asset, which technically it may be, but the mortgage on it is a liability.

  • The definition of personal assets and liabilities is worth learning and giving some thought to before you make financial decisions.

  • Generally speaking an asset makes you money and a liability costs you money. So purchases are not always what they seem, if you give it some careful thought.

  • Things are only worth what someone will pay for them

  • People constantly misuse the word 'worth,' especially when it comes to big purchases like property and vehicles. What something is worth on paper is not always what you can sell it for tomorrow.

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  • Teach your teen to understand that if they own something that can be converted into cash, it is only worth what someone would pay them for it in the current market. This helps them develop a clear picture of where they stand financially at any given time.

  • Teaching your teenager these basic principles will help him make more informed financial decisions, now and well into the future.

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Karen Banes is a freelance writer specializing in parenting, lifestyle and entrepreneurship. Contact her at her website or via Twitter where she tweets as @karenbanes.

Website: http://www.karenbanes.com/

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