What Teens Need to Know About Money Management
Teens and money have been a hot topic for generations, with teens often wanting to spend and parents urging them to save money. Let’s face it, clothing, movies, cars, and going out are teen priorities and the earlier teens learn about money management, the better prepared they will be to save and spend wisely. Young adults are taking on more debt, and more types of debt, than ever before and how they manage their earnings, and debt can affect their independence and their future.
Here are two of the top factors affecting teens and how they manage money:
1) Lack of Financial Education. Many children and young adults do not receive financial education at home or in school. Even at an early age you can introduce money management to your child, which will provide a foundation for understanding saving, spending, budgeting, and other basic money concepts.
2) Credit card debt. Although teens may qualify for a credit card, if your teen isn’t knowledgeable about how credit cards work it could lead to overspending, unpaid bills, and bad credit.
3) Lack of credit history and low credit score. Establishing good credit early-on can help teens as they seek to take out loans for school or to by their first car. Some teens get credit cards before they truly understand how debt works, and they soon find themselves with mounting credit card debt and a low credit score. Teens can learn good saving and debt practices with a Credit Builder Loan from Credit Union of Southern California (CU SoCal). Having a strong credit history and score provides better access to credit and saves teens money with offers of lower interest rates. A Credit Builder Loan can benefit teens who have no established credit or a low credit score.
What do teens need to know about money management?
It’s never too late to teach your teen about good money management. Here are some tips to help adults teach the children in their family learn financial responsibility:
1) Discuss your own financial situation. Sharing your financial history and the lessons you’ve learned is an example your teen can relate to. Consider showing your teen things like your credit card statements, car loan statements, and rent or mortgage statements. By honestly sharing your family’s finances your teen will begin to understand what it means to be a financially responsible adult.
2) Introduce the concept of budgeting. Help teens and young adults create a personal budget. Consider showing your teen your household budget and show them how to track income and expenses, plan for emergencies (such as a car repair or broken cell phone), and save for large purchases (such as a vacation). Positively acknowledge when their savings goals are achieved.
3) Open a youth savings and checking account. One of the best ways to teach teens about money management is to open a Youth Account or joint account at a credit union or bank. As your teen receives money from their allowance, work, or birthdays, visit the credit union branch with them to make a deposit. When your teen reaches the age of 18, they can have their own accounts in their name. This is the perfect time to introduce the concept of earned interest and compound interest, which makes their savings grow faster.
4) Using credit cards. When you’re with your teen and you use a credit card at a store or restaurant, take the opportunity to teach children about how credit cards work, credit limits. Consider getting your teen a pre-paid credit card that’s loaded with a specific dollar amount. Reviewing their monthly statements with them helps young adults learn about budgeting. Make sure you don’t reward uncontrolled spending on a pre-paid card by continuing to add money to it. If your teen abused the card limit, take it away. Always reward smart decisions and disciplined saving and spending.
5) The importance of credit scores. Discuss how credit scores and a person’s credit history affect your life, both positively and negatively. Your teen may be surprised to learn that a low (bad) credit score equals high interest rates on loans and High (good) credit scores equal low interest rates on loans. Some employers require a review of an applicant’s credit score as part of the hiring process and people with bad credit or bankruptcy may be passed-over for jobs.
6) CU F.L.Y. financial empowerment program. Empower high school teens with essential money management skills through CU F.L.Y. (Credit Union Financial Literacy for Youth). Prepare them for financial success with practical tools and confidence-building knowledge backed by national research.
Children who develop a healthy relationship with money are more likely to take their good money habits into their teens and adulthood. Early education about finances is the most important step that a parent, grandparent or legal guardian can take to teach teens about money matters. When you feel the time is right, talk with your child about money and visit a Credit Union of Southern California (CU SoCal) branch office together.
At CU SoCal, we’ll explain the features and benefits of CU SoCal Youth Accounts to help your child get started on their account.
CU SoCal Youth Account FAQs:
What is the age range for Youth Accounts at Credit Union of Southern California?
Youth Accounts are available for Members under the age of 18.
Are there any fees on Youth Savings Accounts?
No, all fees on Youth Savings accounts are waived.
Can my child get a checking account and debit card?
Yes! Youth Members are eligible to open checking accounts with a debit card. While age 12 or 13 is the typical age for kids to have their first checking account with debit card, we leave it to the parents’ discretion if they want to open a checking account with debit card for a younger child. Please note that Youth Members can open a free Classic Checking Account.
Is there a minimum opening balance required for Youth Accounts?
The standard $10 opening balance for new Share Savings Accounts will apply.
How can I track my child’s transactions online?
Your child can register for Digital Banking, which would allow them to view their account through Online and Mobile Banking. Parents or guardians can link their child’s account to their own by visiting a branch, via online chat through our website or Mobile App, or calling our Member Care Center at 866.287.6225, Monday-Friday from 9:00 a.m. to 6:00 p.m. and Saturday from 9:00 a.m.-1:00 p.m.
Why savvy consumers choose CU SoCal
For over 70 years CU SoCal has been providing financial services, including HELOCs, car loans, personal loans, mortgages, credit cards, and other banking products. Anyone can become a Member of Credit Union of Southern California (CU SoCal). Learn more and open your account online.
Please give us a call today at 866.287.6225 today to schedule a no-obligation Youth Account consultation with a CU SoCal Member Services specialist.
Get Started on a Youth Account Today!