How to Prep Your Teen for Financial Independence

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One of the Best Things you can Teach Your Kids is Money Management

In high school, the closest financial education I received was learning how the stock market works and creating a fake stock market account to “practice.”

Yeah, 17 year olds practiced Wall Street vibes, but didn’t learn how to balance a checkbook, or learn the value of saving and budgeting.

Parents, We Need to Teach our Kids About Managing Money, and We Need to Start Now

I have talked to my kids about money their entire lives. Already in elementary school they understand that money is not limitless, and that we budget for everything to make sure everyone can have what they need.

Just last week my fifth grader gave me a big hug and said, “Mom, thank you for making a budget for clothes so I could buy this new outfit today.” She’s starting to get it!

Don’t worry, if you haven’t started these conversations with your kids yet, it’s not too late. There are plenty of valuable lessons to share no matter what age, and MSUFCU provides resources to help you jumpstart these conversations and make learning about finances fun and memorable. 

5 Things to Teach High Schoolers About Money Before They Graduate

These are the five things I wish I knew when I graduated high school. My parents assumed I’d learn about money the way that they did – through hands-on experience.

But I want to give my kids more money street smarts before they are out in the real world so their path to financial independence is much smoother.

1 – Teach Teens How to Budget

If you don’t have a plan for your money, it will disappear in a snap.

A college friend was always overdrawing his account because he just spent based on his checking account balance. He never considered that he would need to pay a bill tomorrow or  buy books on Monday. He spent what was in his account without budgeting for future expenses.

Educating teenagers about planning for their money is important. If their checking account has $200 in it, and they budgeted $50 for clothes, they’ll know not to use up that extra cash that’s earmarked for a phone bill or gas money.

Showing kids your family’s budget is also a great idea. Some parents even let their teen take the wheel on the bills and budget a couple of times to experience what it’s like.

It’s very eye opening for kids!

Once they’ve seen what a complete budget looks like, help them create their own.

A budget for a family of five with two working parents is very different from a single young adult living on their own, with one income.

This also gives teens the chance to learn how to set up auto pay for bills, read billing statements and use checking and savings accounts.

2 – Teach Teens How to Save

A gut reaction is to spend money you have left over after you budget because, “yay, life is fun!” But the reality is that we should all be saving for future needs and for emergencies. 

Start by helping your teen set savings goals. What are some items they want to purchase?A prom dress, video game system, or maybe a new phone? Help them figure out what amount they need to save each week to meet that goal.

We have our financial accounts with MSU Federal Credit Union and I love their savings accounts. We have a few, because we save for different things.

Subsaver accounts – separate savings accounts within a main account – are great for short term goals, which you can personalize by naming them after your goals, such as “Play Station 5” or “Graduation Trip.” It’s rewarding to watch your savings accounts grow as you get closer and closer to meeting your goals.

You can also set up savings accounts for long-term goals like expenses that come along with a car or an apartment, while earning interest.

3 – Start an Emergency Fund

I wish I had known about emergency funds much sooner.

This is my favorite savings account because of the peace of mind it brings knowing I have funds saved for when I unexpectedly need them.

For years whenever our car needed maintenance or an appliance broke, we went into debt to pay for repairs. 

But now, I have an account named “Emergency Fund” within my MSUFCU account and it now has enough funds to cover an unexpected car repair or hospital bill.

It’s easier to save for a specific goal like a new phone, but much harder to plan for the unexpected. Educating kids about these types of expenses and how to be prepared to pay for them can help them avoid debt and is the extra reassurance you need during an emergency situation.

4 – Be Wise When Choosing a Financial Institution

When looking for a financial institution, look for a checking and savings account with

  • No minimum balance requirement
  • No monthly fees
  • Paying higher dividends on savings products, and lower interest-rates for loans
  • Free access to ATMs (no fees for usage)
  • Free debit card
  • Additional perks for college students
  • College students receive the lowest loan rates at MSUFCU
  • Free financial education with virtual and in person events
  • They receive discounts at local area businesses when they use their MSUFCU Debit or Credit cards to make purchases (Local Loyalty program)

5 – How to Build Credit – And Use it Responsibly

Learning how to manage credit is important. 

Credit scores are used by lenders to determine how likely you are to pay back a loan. The higher the credit score number (usually between 350 and 800), the more favorable interest rates on loans you may receive, which saves you money. Some landlords also review credit reports – which details your credit activity and current credit situation – so having positive credit history can help you land that apartment.

MSUFCU recommends that graduating high school seniors and those starting college or a trade school should start building a positive credit history.

What is a Credit Report?

A credit report is a history of your credit, including your debt, what types of
credit you have, how long you have had it, and more.

 You can view your credit report for free from each of the three credit
bureaus (Equifax, Experian, and TransUnion) each year through
AnnualCreditReport.com

But TEENAGER BEWARE: Use credit cards wisely. It’s easy to overspend with a credit card so only use it if you have cash available to pay for that item.

MSUFCU’s tips for responsible credit card management:

  • Pay at least minimum payment each month (or the full statement balance if you are able to) on time
  • Do not open multiple credit cards within a short amount of time
  • Do not close credit cards that are paid off (keeps your available credit higher)
  • Review your monthly statements and take advantage of card security features that help prevent fraud.

MSUFCU Offers Great Accounts for Students

Because MSUFCU believes that finance education should start young, and offers accounts for kids of every age.

Some of the perks include:

  • 24/7 Account Access through the MSUFCU Mobile app.
  • Free Totally Green Checking Account with free debit card and access to view your credit score (updated quarterly in the MSUFCU Mobile app). 
  • Free financial education (online and in-person on campus).
  • Receive the lowest interest rate even if you don’t have credit established. **
  • Cash Back Platinum Plus Visa Credit Card.
  • Free access to MSUFCU ATMs and CO-OP ATMs.

**Must attend or have graduated from an accredited 4-year college or university and meet either be a current college student or a recent graduate within the last 12 months.

For more information on how MSUFCU supports student finance goals, visit their site here.

MSU Federal Credit Union

Helping members and employees achieve financial security, their goals, and ultimately, their dreams.

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1 thought on “How to Prep Your Teen for Financial Independence”

  1. It is advisable to talk to more than one financial advisor and then compare the different advice that you receive. You can get a number of different opinions and points of view and either combine some of the points or choose which advice will be suit your needs. It is best to find an advisor that is local but if you can’t seem to find one locally then you can try online. If you do take financial advice online though you need to do so carefully as you just don’t know who you are dealing with on the internet. Some companies will advertise free financial tips but you will often find that once you begin to get involved they may begin to request fees for this and fees for that.

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