The sooner teenagers begin to learn smart money management, the sooner they can become financially independent adults.
Right now, 57 percent of all 20-year-olds are dependent on their families for financial support, according to an American Express survey. Or, to put it another way, a majority of parents who have a child in his or her 20s are helping pay their childrens bills.
Today, I want to share three methods for developing money-savvy teens and, I hope, financially independent young adults.
Begin with a budget
I believe the habit of building and using a budget is an essential life skill. Help your teenager learn this habit.
Teens have expenses, and a budget can help them understand and organize those expenses. Use the money you spend on clothing and activities to create a budget, and then turn the money over to your teen. With a plan in hand, your child can spend the money. This is an opportunity to learn how to shop wisely.
Im not suggesting you hand over your credit card. Rather, decide how much you can afford to put toward school needs, activities and social life and consider that money income. At first, help your child create a spending plan, and, later, have him or her create the plan and present it to you.
If your teen has a job, his or her income should be factored in to the budget.
Start a mini emergency fund
When getting started managing money, budgets are fragile, and a crisis can quickly sink your teenagers plans. The goal for your child and you, too is to have three to six months of living expenses in an emergency fund.
When your child is getting started, the fund can be modest, and you can help build it.
I suggest you match your teen dollar for dollar to help him or her reach the goal more quickly. Most banks require $100 to open a savings account. So challenge your child to save $50 and match it with $50. Then go to the bank together to open the fund.
Now set a new goal of reaching an amount equal to three months of the budget. Encourage your teen to save a little each month to meet that goal.
Avoid student loan debt
College graduates are leaving school with an average of $23,000 in student loan debt.
Your childs senior year of high school is not the best time to start researching scholarships. Ideally, you will start when your teenager enters ninth grade.
Make the most of the high schools resources and online resources when scholarship hunting. A quick search on www.FinAid.org shows scholarships of $10,000, $25,000 and $50,000. Carefully review the eligibility requirements of possible scholarships so your teen can build a foundation to be competitive in the race for tuition money and reduce reliance on student loans.
You can put your teen on the path to financial health and independence with these three strategies. After all, The Bank of Mom and Dad cant stay open forever.
www. Personal FinanceCoaching.com Durango resident and personal finance coach Matt Kelly owns Momentum: Personal Finance.