Helping Your Teen Finance the Next Stage in Life
March 24, 2022
As your children grow older and enter high school, their expenses will grow with them. Buying a car, saving for college, signing up for a camp, or pursuing a hobby all have significant costs associated with them. So, it’s important at this stage of life to teach them how to manage their personal finances in pursuit of their goals and dreams.
Helping your kids develop good money habits now can impact them throughout their lives. Financial literacy is an ongoing conversation and it can start at an early age, but it’s not too late to start with children who are reaching high school age. Perhaps your child wants to buy a car when they turn 16. Talk about budgeting and saving so they can get that first set of wheels.
Additionally, introducing your children to loans and explaining how financing works is important as they enter early adulthood.
Buying a Car
There are many things first-time car buyers need take into consideration – primarily, what type of car can they afford based on their monthly budget. Even if you’re helping your child financially, it’s a great idea to sit down with them understand the expenses associated with a new car. These include the cost of auto insurance, gas, and potential repairs. Your teen should then research where to shop for a car and the financing terms including needing you as a cosigner for the loan.
Explain how interest on a loan works and how you and your child can avoid paying more on the loan with a down payment, and by keeping the loan term as short as is affordable. Teach your teen that the longer it takes to repay a loan, the more interest they’ll pay.
Preparing for College
Paying for college is a significant expense. Even if you and your budding college student have savings set aside, a student loan may still be necessary. There’s a lot for your teen to consider with such a big life decision, so make sure to take the time to research multiple options. Encourage them to determine how much a student loan costs overall once interest and any fees are factored in as well as the monthly payment and the difference between a fixed and variable interest rate.
Expand Your Knowledge with Financial 4.0
If you or your child are looking for more information on financial subjects like student loans or how to build your credit score, MSUFCU’s educational website, “Financial 4.0” is here to help. Free for all members and non-members, Financial 4.0 has articles, quizzes, an interest rate calculator, and access to our podcast Wallet Watch. Learn everything you need to know about budgeting, investing, credit, identity theft protection, student loans, and much more.