Teens crave independence and want to be taken seriously; and, as parents we have to find ways that they can assume more responsibility in a way they can handle. Money just may be the answer.
While we make sure our kids learn reading, writing and arithmetic, there is something noticeably absent from their school education, and that is money smarts. Unfortunately, your teen may be able to go through life with little understanding of geometry but no one goes through life without having to deal with money. How your kids learn to manage it may be one of the greatest indicators of how successful and responsible they will be as adults. It’s never too soon to get started, and while they may groan at first, your teens will start to quickly realize the power that comes from making choices on their own, and they will become more self-confident in the process. Here are some ways you can help your teen work towards financial independence:
- Adult conversations. Teens love to “listen in” and partake in adult conversations. Unfortunately, our adult response can be “This doesn’t concern you,” or “I was talking to your father.” We try and shield our kids from all the responsibilities they will some day face, but all we are doing is delaying their growth and progress. Have open conversations about finances in front of your kids. Take the time to discuss the decisions you are facing, whether it is buying a new car, refinancing your mortgage, or funding a family vacation. Let them see the way you and your husband research and sort through your options to come up with the best fit. Walk them through the math, as you analyze which outcome is best and then show them how you factor in the “quality of life” issues, such as saving time or convenience to make your final decision. Find out what they think and why.
- Basic banking. If your kids don’t have bank accounts of their own, set out with them and research which banks offer the best account for their needs. Show them that the interest rate earned on the account is only one factor to consider; the fees the bank charges, and the convenience (be it location, operating hours, or ATM availability) also will determine where to bank. After you do this research you may even find yourself switching your bank account. Have them open an account and show them how to keep track of checks, deposits and withdrawals in the transaction register. Also show them how to balance their checkbook.
- Savings. If they are earning money, have them commit at least 20% of their income to savings. If they have received gift money, encourage them to save a portion of that as well. This money should go towards a long range goal like college, or buying a car.
- Budget. Have your kids write down any money they earn or receive from you or others as gifts or allowance. Then have them write down everything that they spend money on. Back out at least 20% and make an item called “savings”. Then, based on what is left over, allow them to decide how they will choose to spend this money. At the same time, consider what you have been giving them to spend on items such as clothing, entertainment, and sports/clubs/hobbies. Now would be the time to adjust some of these numbers if you find yourself shocked by what you have been spending. If there is a difference that needs to be made up, your kids should decide if they will use the money in their budget to close the gap, or go without one activity to pay for one that they value more. Show them how delaying gratification now may make them able to save more money to purchase an expensive item they really want instead of buying a bunch of less expensive items they really didn’t need.
- Maintenance. Help them keep their budget on track by having them monitor what they have saved and what they have spent every month. Make sure they keep up with reviewing their bank statements and/or balancing their checkbook.
- Earnings. If they want a bigger budget, they will need to earn more. Guide them in ways they can earn money, such as babysitting, lawn work, tutoring, etc. Don’t forget to have them give their savings account a raise as they start to earn more.
- Charity. It’s always good for kids to realize their blessings and the importance of giving back to those less fortunate or to causes that help others. Help them decide on an amount to donate every month.
Finally, the best lesson you can give them is to put your money where your mouth is: be organized and know where your money is going; pay your bills on time; live within your means; and finally, enjoy your money but be responsible with it. As always, there is no substitution for setting a good example.