Guiding Teens To Financial Independence

The teenage years are the time when a person transitions from a child into a young adult. Part of that transition involves reducing the level of financial support they receive from their parents. The journey to financial independence can be a bumpy one. Effective parental guidance can, however, do a lot to smooth the path. Here are three tips to help you help your teen.

Read up on modern personal finance

In general, the basic concepts of personal finance are much the same as they’ve always been. What’s changed, however, is the way financial products are presented, run and used. For example, digital technology has made it much faster and easier to apply for credit. In fact, you don’t even necessarily have to apply for it. You can be offered it at the checkout.

This means that modern teens have to face a slightly different set of challenges than their parents. Those challenges will usually increase substantially after they turn 18 and can sign contracts without adult permission. On the plus side, they’ll also have a lot of fresh opportunities too.

Find out what your teen’s goals are

Children below the age of 18 cannot have any formal debt. Ideally, you want to encourage them to keep things that way for as long as possible. It may be tempting to try to push home the misery debt can cause. This is understandable but negative messaging tends to make people (of all ages) switch off.

Instead, try finding out what their goals are. Then work with them to see how they could turn those dreams into real-world plans. This will give you the opportunity to teach them about the importance of using debt mindfully. For example, you could look at the difference between getting a loan to buy a car and using a credit card to buy a new pair of designer trainers.

Similarly, you can frame “boring” issues like insurance and savings in a positive way. For example, you could point out that savings aren’t just for when bad things happen. They can let you take advantage of opportunities too. That could mean anything from a bargain at the sales to a spouse visa for the love of your life.

Teach them how to manage their credit score

It can be hard for mature adults to grasp just how important it is to have a strong credit score. It can be even harder for teens to grasp just how much of an influence a credit score can have on their lives.

The key point to get across to them is that, in the modern world, credit scores influence much more than “just” your ability to borrow cash. They influence your ability to get any sort of contract which allows you to pay in arrears. This can mean anything from a mobile phone contract to a rental contract. It can also influence your ability to get certain jobs.

Building up a credit score takes time so it’s well worth starting early. You might, therefore, want to help your teen get a credit card with a low limit. Using this responsibly can stand them in very good stead later in life. For example, it may help them to get approved for a mortgage.

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