Every time that your kid continues to grow, as a parent, your responsibility towards them increases, at least until they are adults. The moment your child steps into his/her teenage years, you should start training them to become adults.
When adulthood hits, it usually happens so fast and so hard. When they are 18, teenagers are legally eligible to sign contracts, own bank accounts, apply for credit cards, and request for loans.
The fact that these young ones qualify for such financial privileges as soon as they reach 18 comes with real-life economic impacts with long term effects.
At this age, these young adults get into a life when from their graduation until retirement, every step they make will heavily depend on their knowledge in finance-majorly money management skills.
It’s not just about the basics in finance like saving and budgeting as there are far more essential aspects of finance that you should groom your teenager with as they prepare for adulthood. Talk to your kid about.
You must help your teen understand what debts are before going to college. At 21, your kid is arguably the hottest prospect out there for a credit card company.
They become their primary targets; these credit companies will have offers rolling through the teen’s email, Newspapers, Social platforms, and everywhere-they will sound so appealing.
Let them understand that the use of a credit card is a loan itself. And, the more the use of these cards, the more the debts compound. When it comes to paying back these loans, interest fees are payable, which in most cases are high.
As a parent ensure that your teen starts their adult life without being in debt because once you are in debt, it becomes so hard to get yourself out of it, and it can take years for that to happen.
Having gone through this stage as a parent or by just the fact that you know about college loans, you understand that several factors affect college decisions. One such factor is the costs against benefits.
In case your teen’s schooling highly depends on loans, as a parent, you have to make them understand the long term effects and the financial obligation that is attached to the credits.
College debt remains one of the biggest financial challenges that is facing the graduates in the United States, which is why your teen must be well aware of what they are subscribing to and the amount that they must pay back after school.
Using an online calculator, show your teen the amount of money that they shall have to repay every month following their graduation and possibly the most likely income they shall earn at that time. With that, you will be giving them the necessary tools for decision making.
If your teen is a few years away from joining college, then this presents the perfect time to have plans in place for saving before college. This move will help ensure that their loan amount will not be as much as it would have been without saving.
Whether you are in a position to fund their entire college or you will need financial support along the way, you must have this discussion with your teen to help them understand that going to college is investing for the future.
At this age, your kid is full of energy. In the process, anything can happen. If an unfavorable and unexpected thing happens, for example, a medical emergency, let them know the importance of protecting themselves. Getting insurance coverage will come in handy in events such as car accidents and other health-related complications.
We have listed below some of the major forms of insurance coverage that you should let your child know about:
- Be with the emergency fund: This may not be a classic insurance cover; however, having some money in place to counter unplanned occurrences is very important.
- Subscribe to auto and home insurance: This insurance cover will protect them in cases such as accidents, destruction to their homes or vehicles, and so much more.
- Health insurance: Employers traditionally provide health insurance, and everyone must have this kind of insurance, it provides coverage to significant health complications and even slight ones with big hospital bills.
Lenders will only hold you in the high if you have a good credit score. Like many others, your teen is likely not aware of what a credit score is, that’s why you should explain to them why it’s essential and should not hurt it whatsoever.
Let them understand that their credit score informs the lender of their level of trustworthiness from their financial pasts. Poor credit score record will have adverse effects on their chances to land loans for cars or homes. It could further affect their chances of employment as well as renting.
When building your credit, three things are under consideration: the rate of your credit utilization, your payment history, and the length of your credit history.
Teenagers have limits on how they build their credit scores. However, one viable way to do that is by becoming an authorized user on someone else’s card.
It’s not a guarantee that your teenager will enjoy indulging in this conversation with you. However, it remains indispensable that you talk to them about this as a way of fulfilling your responsibility as a parent.