5 tips to help your teen make the most out of their summer earnings!

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5tip blog1. Create a budget!

Be sure to assist your teen in creating a budget before they spend any money from their paycheck. Creating a written plan before spending is essential for financial success. Identifying wants vs. needs is the first step in creating a budget. All needs (bills, savings) should be paid before purchasing wants (concert tickets). Teens don’t have to pay a mortgage or buy groceries, so you may be thinking everything to them is a WANT! This is not necessarily true; you will see below that I challenge you to assign your teen financial responsibilities. Also, encourage your teen to include giving as a part of their budget. Teens should be aware of local charities that they can give to.

  1. Save the first 10% of earnings!

As adults we know that we should save and many of us have a problem with this. Savings should always be the first item in a personal budget. Your teen will best model behavior observed rather than said. If you have a hard time saving, explain some of the reasons why to your teen. Then make a savings pact with your teen to hold both of you accountable.

  1. Open up a checking account with your teen

Teenagers should experience how a checking account and debit card operates before moving out of the house. The days of balancing a checkbook are pretty much extinct. Go over monitoring debit card purchases on bank apps and websites. Also, explain that overdraft fees can occur if he/she does not monitor their spending. If your teen’s job is seasonal, be sure to have your teen close out the checking account at the end of their employment.

  1. Assign a bill or a portion of a bill to your teen

It is important for teens to have the responsibility of paying a bill. I had to pay my car insurance when I was a teen. Assign financial responsibility according to wages earned. If your teen is working 25+ hours a week earning minimum wage; have your teen pay at least 50% of their cell phone bill.  If your teen is working 10-15 hours a week at minimum wage maybe require your teen to pay $30 a month on the cable bill. The bill assigned to your teen should be classified as a “need” within their budget.

  1. Set 3 financial goals with your teen.

It is important for teens to delay gratification by thinking of long term goals. Have your teen identify a financial goal they wish to achieve in the next 30 days, 3 months and 12 months. A 30 day goal could be to purchase a nice outfit or watch. While a 12 month goal may be to save up enough money for a used car.

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