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Teaching your teen about money management isn't an easy proposition. Between the hulking advertising industry dying to get its hands on your teen's disposable income and peer pressure to buy the "right" brands, parents can feel they are fighting an uphill battle when they talk about saving and moderation.
Teaching your kids to delay gratification, to save hard-earned money, and to be wise consumers offers them critical skills that will pave the way to a successful adulthood. What you can do:
- One of the most important things you can do to teach your teen good money management skills is to model them yourself. If you have a wicked credit card habit, you can be sure that your teenager will be the first to point out your hypocrisy.
- Encourage your teen to get a job. While this will mean more disposable income for her (just what advertisers are hoping for), it's also an opportunity to learn about the value of time and hard work. The purchase that looked perfectly reasonable when you were paying for it can seem less necessary when your teen realizes she had to work five hours to earn it.
- Show your teen how to bargain-hunt. They can often find the same item for less by simply checking Froogle or another cost-comparison site.
- Require your teen to contribute to big purchases. Paying for his car insurance or saving up for a coveted item offers important lessons in delayed gratification.
- Say no to credit cards, at least until your teen has demonstrated a high level of responsibility. Plastic tends to add to a sense of unreality about money, while handing over a stack of bills is a visceral reminder of an item's cost.
- Manage those cell phone minutes. Cell phones provide a unique opportunity to teach your child about obeying limits and the high costs of exceeding them. Require that your teen pay for any excessive phone charges and you may get them practicing moderation in no time.
- Create plenty of opportunities for either/or decision making. Saying "yes" to all of your teen's requests doesn't require her to practice any decision making at all. Make sure, even if you have the means to indulge her every wish, that you say "no" without guilt.
- Teach your children to think critically about the advertisements aimed at them.
- Make saving look attractive. Open an IRA for your child and encourage her to contribute a percentage of each paycheck by offering to match the contributions. In 2009, contributions to an IRA can't exceed the amount a kid earned in the course of a year or $5,000, whichever is less. So if your daughter made $1,000 working her summer job, $1,000 can be contributed to an IRA. It doesn't matter who contributes the money -- the kid or the parents -- as long as the combined amount doesn't exceed the limits.
The good news is that, despite your 16-year-old's protests, parents hold a lot of influence. Using it to teach your teen effective money management is a gift that will keep on giving throughout a lifetime of consumerism.
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