|
Question: I'd like to help my teenage son learn to manage his money, but I don't know how to start.
Answer: One of a parent's responsibilities is to teach your kids the skills and discipline they'll need as adults to make their dreams come true.
Unfortunately, there aren't many opportunities to learn about money
management in most schools. In fact, a Texas Tech researcher found that high
school students today know less about financial topics than did teenagers 30
years ago.
Teaching children to save money for the future gives them a lifelong money
management skill. Start teaching this skill with a lesson in goal setting,
because, as we know, few children are motivated to save for an abstract
idea. However, helping them save for something they want makes sense to them
and is a tangible goal.
As hard as it may seem to watch your children make mistakes, let kids make
their own decisions as they learn to manage their money. For example, if
your son is responsible for providing some of their own school supplies,
help him save his money - even if that means putting the money in an
inconvenient place where it's difficult to access and spend. Otherwise, be
available to offer advice or, if he spends all of his money, sympathy. But
don't rush to bail him out if he has made poor money management decisions;
he should understand the consequences of his spending choices to learn to
correctly manage his money.
Work plays an important role in financially educating young people. In fact,
employers are impressed with young people who work to finance their
education and personal needs. However, teens should limit their work hours
to 10 or fewer a week. Studies show they get higher grades than do teens how
worked 20 or more hours a week.
Children can contribute to an Individual Retirement Account - an IRA - with
income from some type of job - mowing lawns, babysitting, delivering
newspapers. If you want to help your children, consider contributing to a
traditional or Roth IRA based on what they earn. If you are self employed,
you can pay your child a salary that can be invested in an IRA.
For example, if your son invests $2,000 in an IRA when he is 15 years old
and never makes another contribution, he will have $234,782, at 10 percent
interest, when he is 65. Let's say your son earns $2,000 a year and fund the
IRA accordingly. If he invests the $2,000 every year from age 13 to 24, when
he is 24 years old, he will have approximately $41,000. If he leaves the
money in the IRA until he is 60 and never makes another contribution, he
will have a retirement fund of more than $1,260,000.
For more information, contact your local
Colorado State University Extension office.
|
