Teenagers and Money

m1Many adults make grievous mistakes with money management, and one of the reasons they do is because they were never taught good, sound money management techniques.

Your teen needs to learn this

Capital One’s Monique O’Grady points out that it’s not getting taught in schools. Parents ask their kids what they learned in school, and on a given day the answer might be math, science, English… but it’s never personal finances. We just don’t take that as seriously as we do other subjects. And yet good or bad money management will impact our lives far more than the periodic table of elements or one of Longfellow’s poems.

Of course, parents can—and perhaps should—step in. There are many aspects of life that aren’t taught in schools, and families find that it’s their responsibility to impart that information to their kids. Money management, good fiscal habits, and financial stability are what you m2wish for your child. Yet, amazingly, she points out that a recent Capital One survey that asked questions of both parents and teenagers revealed that less than half the teens surveyed actually worked on a plan for financial success with their parents.

Why leave something so important to chance?

You’re the best teacher

The reality is that the relationship with money and finances that we develop as adults have everything to do with what we learned about money and finances when we were living with our families of origin. The way that our parents dealt with money, with budgeting, and with saving has everything to do with the way young people perceive it… and will act on it. Spending habits are observed—and acquired.

So how can you help your adolescent children make good decisions now about money that will last them a lifetime? How do you teach them the value of financial planning, of budgeting, of deferring purchases and saving money?

There’s no time like the present

Whatever moment you’re reading this is the exact right moment to start. There’s always something going on in your teen’s life that can be connected with the responsible use of money. Maybe they just got a part-time babysitting job. Maybe Grandma gave them some cash for their birthday. Maybe they’re considering what to buy a family member (or a boyfriend or girlfriend!) for the holiday season. No m3matter what the occasion, you can turn it into a learning experience.

It’s also essential to model good behavior. Discuss “needs” versus “wants” when you put off buying something new, and explain to your teen why you don’t just run out and buy something, even if you want it, even if you have enough money to buy it. Show that you always know how much you have in your bank accounts. Share the monthly bills with your teen when they come in, and talk about how it’s important for your family’s well-being that you’re able to budget, not just in order to pay your immediate bills, but also to prepare for the unexpected.

Here’s how to get started

Talk about shopping. Sit down with your son or daughter and list what it is that they need—for summer camp, for example, or the prom, or the new school year. Then explain to them what the budget is for that list—what you can afford. Creating a budget can be an eye-opening experience, and living inside it can be more difficult than your teen thinks. Be sure to stick to that budget, too: you don’t want them thinking that the numbers are meaningless or flexible.

m4Establishing good habits

Show your teen how to make a budget work: by comparison shopping, by researching prices, by looking for sales. And set goals beyond how you spend money: saving money needs to be a major goal. All the great spending habits in the world won’t help if your daughter or son doesn’t also develop saving habits.

If your teen wants a big-ticket item and can show you a reasonable plan for paying it off, consider lending them the money for it. Draw up a contract; be clear about your expectations of repayments according to the agreed-upon schedule. Repossess the item if payments aren’t made. It’s just a glimpse of what will happen in the real world and will give them a sense of why you’re insisting on fiscal responsibility.

You can help your teen learn money management skills that will last a lifetime. The sooner you start, the better off they’ll be!