The National Financial Educators Council recently conducted a survey of 15-18 year olds to assess their financial literacy. The average score on the assessment was 61 percent for this age group. The positive news is that this score is up from previous years, while the negative news is that we have a long way to go to ensure all teenagers are financially literate and capable of being independent adults in the near future.
Parents are the primary people who should be teaching their teenager financial lessons, and while they may discuss savings and even investing with their teenagers, one topic that doesn’t come up often is buying a home.
Although it might seem like a topic that’s not relevant just yet, it’s better to give your teenagers as much financial knowledge as possible when it comes to homeownership so they can spend the next few years preparing for that big step. It’s also important for the parents so they don’t have boomerang kids who come back to live at home after college!
Here are some reasons why your teenager should know about buying a home:
1. So They Can Save a Down Payment
How much money would you have saved if you started saving for your home’s down payment as a teenager? Maybe you would have had enough money to pay for a home in cash. If you get your teenagers started early when it comes to their saving strategies, they can learn what it takes to work and save for big ticket items. Even if they don’t save for a house, saving for other expensive purchases like a car can help get them used to the process of going without and funnelling their hard earned money into a savings account.
2. So They Understand All The Extra Costs
So many adults look at buying a home far before they are ready. They see that a mortgage payment will be less than their rent, so the jump on the homeownership bandwagon thinking they are getting a good deal. However, there are many additional costs than just a mortgage payment when buying a home, like closing costs, repairs, and property taxes.
Every time you encounter a home repair in your own home, talk to your teenagers openly about it. Remind them that this is a part of home ownership and that if they rent, their landlord would take care of the expense. Tell them about the pros and cons and communicate everything. The more knowledge they have of the financial burden of owning a home, the more prepared they will be when it’s time for them to own a home of their own.
3. So They Make the Best Investment Possible
Overall, the goal is to help your children make the best investment possible. This includes telling them about how a home is valued based on square footage, improvements, and location. Tell them about ways to make money in real estate, like flipping houses or getting roommates to help pay the mortgage, including all the pros and cons involved in those options.
Ultimately, even if your teenager doesn’t buy a home for ten years past living under your roof, you can rest easy knowing that you taught them the most important lessons there are when it comes to one of the biggest purchases they will ever make.
Catherine Alford is the go-to personal finance expert for educated, aspirational moms who want to recapture their life passions, earn more, and take on a more active financial role in their families. Named the Best Contributor for Personal Finance in 2014, she has written for Yahoo Finance, U.S. News and World Report, The Huffington Post, Kiplinger, Investopedia, Business Insider and many more. Catherine is the founder of personal finance blog BudgetBlonde.com and is the innovator of the web course, Get Paid to Write for Blogs.
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