BMI Federal Credit Union
Talking To Your Teen About Money
When you have a teenager in the house, the beginning of the school year is a good time to start talking about money. Once they graduate, their life decisions will be impacted by their financial knowledge. Eighteen-year-olds can sign a lease, open their own accounts, and get a credit card in their name. To prepare them for this stage of life here are four key financial topics to discuss:
1. Student Loans: Many teens and families may be considering taking out a loan to afford the cost of college. It is important for your teen to understand the long-term impact and financial obligation of taking on debt. Start by exploring potential salaries of occupations of interest. The U.S. Bureau of Labor Statistics offers a database of wages by occupation. Next, use loan calculators and tools to see how much it will cost to obtain the necessary education for that field. Then, based on the salary potential, evaluate the time it may take to pay back the loan. Explore the U.S. Department of Education College Affordability and Transparency Center for resources.
2. Budgeting: Your teenager may be uncertain of the expenses they will have to pay when planning to move out on their own or start college. Understanding the cost of living (rent, transportation, groceries, bills, etc.) and how to prepare for it will help them live independently. Work with your teen to create a sample budget. Use this as an opportunity to teach them about everyday expenses, as well as saving and debt repayment.
3. Saving: Help your teen open a savings account. Together you can set a goal and create a plan for saving. Additionally, discuss the importance of setting up an emergency fund to cover unexpected costs. Encouraging your teen to set aside money now may reduce the amount of debt they will need to take on for the next phase of their life.
4. Credit: It is important that your teenager appreciate the value of building and maintaining good credit. Talking to your teen about these financial topics will help them understand the impact of their decisions now and will help them be better prepared to make smart choices in the future.