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Janine and I wish to thank you sincerely for the considerable professional expertise you displayed in re-structuring our personal finances. We appreciated particularly your knowledge of numerous financial produ...

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How to Have Rich Kids

Samantha Brown is a finance journalist for Sky News the Seven Television Network (which includes Sunrise, the national 4:30 news and kids program GirlTV where she is the show's resident finance expert), she also writes and presents the afternoon report on 2UE's Steve Price Drive Show. Samantha has co-authored three books : The Teenager's Guide to Money, The Teenagers Guide to Part-time Jobs and Leaving Home: The Ultimate Guide, she is the sole author of Travel and Working Holidays : the Ultimate Guide.

The teen market is worth big bucks these days. It's no wonder companies are increasingly targeting vulnerable teenagers with 'must haves'... like mobile phones, Play Stations, iPods and the latest pair of speakers.

With all these ways to spend their, or their parent, hard-earned dollars, it's no surprise the level of teenage debt is spiralling upwards.

As a teenager, who didn't study subjects such as economics or business studies at school. I had to find out what was going on in the 'financial jungle' by myself. I liked what I found, and went on to do a business degree and pursue a career in financial journalism. Along the way, I discovered there wasn't a lot of material out there for teenagers, helping them with their financial survival... and what was available was written by people my parents' age who were a bit out of touch. So I decided to write a book, from young person to young person, explaining how the 'financial jungle' works - how to get money, keep it, and make the most of it.

As you may have experienced with your own kids, there are heaps of ways young people can get into debt. Whether it be owing parents money from car crashes, buying a few too many luxuries on the first credit card, or taking way too long on the mobile.

The first warning signs are when they can't pay their credit card debt in full each month, or are getting constant reminders for their mobile phone bill. If your kids can't manage to pay their bills on time, it's time to help them take stock of their financial situation.

Learning to budget and save young is really important. If a teenager can get into good habits, they'll take them with them for the rest of their life.

A budget for a teenager doesn't have to be too complex - just a table or chart that attempts to balance their income and expenses, and identifies how they can save at least a small amount of money.

A budget lets them see, in black and white, where their money comes from and where it's going. That should help them use their limited cash in better ways.

To help reduce the pain of doing a budget, encourage your kids to set a couple of dreams - things they would like but can never seem to afford. It creates an incentive for them to do a budget, and then stick to. Saving for a car might take 5 years of more, while putting money away for a new surfboard or music system might involve a six-month savings plan.

The key rule for successful saving is to put away little amounts on a regular basis over a lengthy period of time.

There are lots of places that we would think about investing our savings, like shares, manages funds, and cash management trusts to name a few. But for teenagers, the good old interest earning savings account is generally the best option. Your kids are able to access their money at any time, whilst still earning interest. Sure, the interest on regular savings accounts is pretty measly. But if you shop around, particularly with online accounts, you can earn close to 5%p.a. Some savings accounts will also offer bonus interest if you make deposits on a regular basis, without making any withdrawals.

The most important thing to remind your teenagers is they have control over their finances.

This article is reprinted from our quarterly published "Financial Matters" Newsletter, December 2004 issue.



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