Money Skills Every Teen Needs to Be Independent

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In order to live independently, an older teen or young adult needs to have 'grown-up' money skills. In other words, not only do they need to remember how to count their pennies, they should know how to put them into an account that will make their pennies grow. They also need to be able to do simple tasks with their money, like pay their bills monthly, deposit money into their bank accounts and be able to purchase necessities.

Here are the money skills older teens and young adults need to know:

Your teen needs to learn how to balance a checking and savings account. And even beyond this basic money task is using their interpersonal and research skills to get a decent checking and savings account. When your teen is looking for a bank to place their money in, ask them to show you the difference between the banks in your town before deciding. They can do much of the research online or they can call the bank and ask questions. Which ones charge for checks or have a minimum balance? After they have done the research, help them choose the right bank for their needs.

Your teen needs to learn how to set financial priorities. Living expenses are often a shock to older teens and young adults when they begin to be fiscally responsible for themselves. Your teen needs to recognize that food is more important than buying their girlfriend roses.

Be sure to model this behavior by showing your teen how you prioritize your expenses in any given month.

Your teen needs to learn how to create a budget, for real. The nitty-gritty, write-it-down-and-know-where-your-money-is-going type of budget. They will learn this good habit by you allowing them to budget your next family vacation or big purchase.

Or you can have your teen set a money goal, split the goal into manageable pieces and then they can pay themselves by placing the money into their savings and recording it until the goal is reached. They will then learn the lesson from obtaining the goal.

Your teen needs to learn how to pay a bill. Something happens to older teens once they owe money to someone and then pay it off - it's called maturity. When a teen feels the sense of responsibility of a bill and then works off and pays the debt, they become more financial mature. Even though they may have gotten frustrated with the process, they have been through it and fully understand what it is to be financially accountable.

The trick to this true feeling of financial accountability is that the teenager should be in debt to someone other than their parents as teens don't often feel the same way when they owe money to their parents. You can help your teen by allowing them to purchase something on credit while they are still at home. Note: teenagers are often not ready for this lesson until they reach an age of 17 and have a job as it can backfire for younger and less mature teens, teaching them only that they are not capable of responsibility or that mom and dad will always be there to pay their debts.

That will not help them have self-confidence in their life skills.

Your teen needs to learn how to look at their finances realistically. When my oldest daughter was eight-years-old, she drew up a budget. It was the 'how many teeth do I need to lose to buy a car' budget. Since she was making a killing off of her grandparents for each tooth - being the first grandchild on both sides of the family - she thought she'd be able to buy a car when she got older using this cash cow. She got a little frustrated when I explained that you only lose your teeth once and cars were much more expensive than that.

You can use online loan calculators located on your local bank's website in order to show your older teen what a real car loan costs a consumer - not only the cost of the car but the interest rates and how they build on to the cost of the car. Using real tools like calculators and allowing your teen to do the footwork will help them look at their finances realistically.

Your teen needs to learn how to make money. While this is a given, it sometimes comes as a surprise to teens that there really isn't a money tree growing in the back yard. In order to make money, most people have to earn it by having a job. Some people have special skills that they use to go to school make even more money. Or they use them to work their way up management or an upper-level position in their workplace. These are ways to make money and you should explain it that simply to your teen.

All in all, to be financially independent your older teen or young adult needs to become self-aware of their money situation and how to positively manipulate it. They will benefit by you helping them learn these ​life skills before they are totally on their own.

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