Read Contracts With Your Teen

As parents, we get a few chances to teach our kids something important that may help them later in life, at least we hope so.

Your teens first few contracts are great opportunities to teach.  Take the opportunity to read through your teens first few contracts with them, line by line.

It may be a cell phone contract, car loan and yes, its boring but super important.

Ensure that they read and understand all the information and the fine print.  The interest rate.  Late fees.  Overages.  Etc.

Hopefully you have discussed and made your teen aware that this new responsibility is important and can affect their credit.

Make sure they can afford this new purchase too, its not a right, its a privilege.

Saving Is Good

Teaching our kids about saving is extremely important and can't go underestimated.

It isn't very long before our kids go from asking for legos to asking for a car.  They do grow up fast.

Besides college, one of the biggest expenses kids will have is car.  College is a different subject addressed in a different article.

The best way to instill some money management and responsibility in your 16 year old is to have them pay for their own wheels.  However the reality is that what they may be able to afford may not be the safest, most fuel efficient car on the road.

The compromise is this and it depends on your ability to help out.  As they save, make a deal that you will kick in 1X, 2X, 3X whatever they save.  This gives them an incentive to save.

Open up a separate bank or brokerage account (I like fidelity) and set it aside for the eventual car purchase.  This gives them the visual picture of saving and money management skills.

Its hard to start this account too early and kids start talking about wheels about age 9-10 so that's an ideal time to get started.