It can be hard enough having your own healthy ideas about money and savings, but teaching your teens is imperative so they grow up with a core set of values about finances. These lessons start early, when your teens are kids. Start by giving them an allowance and showing them how to allocate some toward savings and some towards spending.
Many people – including teens – have an emotional connection with money. We spend when we’re stressed, excited, nervous, or sad. We spend to feel better, but often times, it has the opposite effect resulting in buyer’s remorse. How can we avoid that in our teens? Talking about personal finance is like bringing up the topic of sex, politics, or religion; it’s uncomfortable and no one really wants to do it. But that’s a conversation that needs to take place because your teen is at a place in her life where she’s facing making her own financial decisions.
As your teen enters college, she’ll have access to credit cards for the first time in her life. How will she approach that immense responsibility? Will she go overboard or will she understand the rights and privileges that come with credit cards? And then there is the issue of student loan debt. How much will your son or daughter accumulate? How will they pay it off? Will they get a job and earn enough to get by or will they rely solely on handouts from mom and dad?
Addressing these matters now is crucial. Introduce them to a budget when they are still young. Show them how to make one, but more importantly how to stick to one. Show them the value in delaying gratification for that outfit they want, those shoes they have to have, that shiny new car they’ve been eyeing. Saving up money through hard work and finally reaching a goal brings with it more rewards than if they were simply handed what they wanted.
Knowing how to create a budget means knowing how much things cost out in the real world. Until you show them, they may just assume “I need it, and mom will take care of it.” Take them shopping with you, show them the price tags, and equate situations to ones they will understand, such as “Mom has to work one whole day to be able to afford that.”
Bring them grocery shopping with you, take a list, and have them help you stick to that list. Show them the value of comparison shopping and how just one impulse buy can alter the whole budget.
If your teen doesn’t have a job yet, give them a weekly allowance commensurate with their age and the chores they do. Encourage them to split up their earnings into two: one for saving and one for spending. You can even split it into thirds, with an extra pile for charity. Or, you can split the savings pile into two: one for future goals such as college and one for shorter term wants such as a new video game, electronic device, outfit or concert.
As you give them more money, give them more responsibilities – not just around the house in the form of chores, but also the responsibility of buying their own necessities, such as lunch at school. Once they realize how much that sub and chips cost every day, the more likely they are to pocket their own money and brown bag it instead.
Older teens may even be interested in learning about the stock market and how their dollars can work for them instead of the other way around. As a parent, you likely have your own stock broker, but you should also have a securities fraud attorney on your side as well to protect your investment.
Teaching your teens about the value of money doesn’t happen in one day. It starts early and becomes a lifelong pursuit.