Graduation is an exciting time to think about the future. As students receive their diplomas, they look forward to college, the real world, and all the future holds. But some graduates don't have the financial literacy they need to navigate the real world. To ensure your distance learner has a basic understanding of money management, use these eight tips to teach him about personal finance.
1. Administer a weekly allowance. This can help even young children learn to manage money. However, simply providing an allowance isn't enough. Teach your student how money is earned by creating a weekly list of chores to be completed before he receives his "paycheck." Encourage your student to practice budgeting by setting aside a certain percentage of his earnings to donate, save, and invest.
2. Charge interest if you lend money. When your student finds an item he has to have but can't quite afford, loan him the additional money with interest attached. Determine a repayment plan and withdraw the designated amount from your student's weekly allowance. As your student continues to make interest payments after the item has been paid off, the cost of borrowing money will become quite clear.
3. Encourage your older student to start his own summer business. From lawn care to pet sitting, your student can tap into his personal interests and make summer work fun. Help your student create a plan and loan him the money to cover initial costs. Throughout the summer, continually encourage your student to practice saving, donating, and investing portions of his income.
4. Encourage your student to take a personal finance course. Studying finances in an academic setting can help your student become familiar with financial terminology. ICA's personal financial literacy course provides a foundation to help your student develop financial responsibility and decision-making skills.
5. Challenge your student to do the grocery shopping. This real-world lesson will show your student just how tricky budgeting can be. Outline the weekly grocery budget with your student. Then, let him tackle the task of buying meals for the week. Strive to let your student make his own decisions. The outcome of the shopping trip, successful or not, will serve as a valuable learning experience.
6. Open a savings and checking account. Start by teaching your student the basic differences between the two accounts. Facilitate discussion about interest accumulation and provide basic instruction on how to write checks and balance a checkbook. Then, open accounts for your teenage student so he can seek your guidance, if necessary, before moving out on his own.
7. Teach your student about credit. The world of credit can be intimidating, but there are a lot of important things to know. Teach your student what a credit score is, how it is determined, and how it affects his financial future. Brainstorm ways your student can start to establish good credit and set an example with your own financial activity.
8. Have real-life discussions about money. Take your student along when you buy the next family car. As he considers college, talk about the pros and cons of student loans and interest rates. Simply involving your student in financial discussions will help him gain a better understanding of money management and feel more comfortable learning about finances.