With more teens getting into debt, whether it's from credit card or student loan debts, living within your means is a concept that needs exploring.
What does it mean to “live within your means and stay debt free”?
Living within your means simply is being on top of your finances. It means knowing how much you can afford at the current time. Unfortunately teens don't know how to stay debt free and live within their means. What you can do to help is teach them. Teach them these 3 quick things and they'll be ahead compared to the rest:
1. Spend less than you earn
This is a simple piece of advice but not many get it. Teens must understand that spending more than they earn means getting into debt. A lot of people charge their purchase on a credit card because they can't afford to pay it in full. Bad idea. Teach your teens the opposite. Only spend what they have now, which means spending less than they earn. Help your teen calculate simple math: how much income comes in month, then how much expenses are. Make sure the income is a bigger number than the expenses.
2. Manage better- how are they spending money?
This goes back to number 1. Have your teens manage their money. For example, a certain percentage should go towards transportation costs, food and entertainment, and especially savings. Life would be so much better if your teen learns how to save than getting into debt.
3. Get educated- study your numbers
Make sure you educate your teen about finances. This includes using debt when it is necessary, such as financing a home. How do you get your teen to get educated about debt, savings, earning and everything money related? Try any or all of this:
* Buy them a book the subject
* Encourage them to go on the internet and research
* Find them a financial mentor
* Tune in on the business channel during TV time
* Encourage them to go to seminars related to money
* Encourage them to learn by "failing"- the more they learn now, the better later
These are not really secrets—but most teenagers getting into early debt can find themselves in a deep hole if they follow them soon. Teach teens to stay debt free so they may become financially successful adults.