Teaching Teens About Money

Suzanna De Baca -- Expert Business Source, 7/30/2008 8:38:00 AM

It can be hard to talk to teenagers about almost anything, but talking about money can be especially challenging.  You may be thinking, “Hey, my children talk about money all the time!” but I’m not talking about kids asking for cash handouts, I’m talking about the topic of financial responsibility.

How can you have a constructive conversation with your teenagers about saving, responsible spending, peer pressure about consumer goods, credit or the value of money?  Discussing these issues with junior high or high school age kids can be difficult, but it is important to help them start developing good habits, good attitudes, and respecting how money works in your life and in theirs.  Frankly, whether or not you have a mature, thorough conversation is not important as you helping them learn about money through experience.

Here are some simple tips to help your kids down the road to financial responsibility.

Earning is learning.  Many teens work, either at part time jobs outside the home or at home.  If your child is old enough to work a few hours a week at a job and it doesn’t interfere with their schoolwork, getting a paycheck can be a great learning experience.  If your child has too many activities or there aren’t jobs available in your area, consider hiring them to things at home.  While some parents see that paying kids to do regular chores, like making their bed or taking out the trash, is rewarding them for doing things they should already be doing, you can contract with your kids to do extra projects for cash.  Pay your children appropriately in order for them to truly connect time and money.  If you pay your child $50 to wash your car, for example, he or she will not truly learn how much it costs a person to wash a car or anything about how the market places value on time, money, education and training.

Open an interest bearing checking account.  Recently I was in a bank (a real bank, not an ATM!) and watched a couple help their teen open a passbook savings account.  She handed over cash and recorded her deposit.  It was clearly an important experience. Going to an actual bank makes money more real than dealing with plastic, like a debit or credit card.  It makes an impression on a kid to meet with a banker. Help your child set realistic savings goals and take them to the bank to deposit their cash into their account.  Whether it is a percentage of their paycheck or their allowance (or birthday or holiday money), it is important to help them save small accounts regularly and to see the value of their account grow.

Discuss the difference between needs and wants.  As you go about running your household, talk to your children about fixed expenses, such as your mortgage or rent, utilities, health insurance or other needs.  Start to help them understand what it costs to maintain a lifestyle and let them see that they can make choices with their money.  Another T-shirt may be something they want, but is it a need?  While this information may not appear to sink in or make an impression in the short-term, you can reinforce it by actually giving them choices, letting them make mistakes, and trying again.

Model the behavior you want to see.  I’ve written about modeling desired behavior before, but nothing teaches your children about money more strongly than how you use and relate to it.  If you don’t want your children to succumb to peer pressure over clothing and status items, resist those temptations yourself or explain your choices.  If all your child ever sees is unlimited spending or first class choices, they will expect life to hand them the same.  You are the most powerful influences in your child’s life, so talk to them about financial decisions early in order to help them become responsible, independent adults.

Suzanna de Baca is president of Private Capital Solutions Group. Securities offered through Broker Dealer Financial Services Corp. Member FINRA & SIPC. Investment Advisor Representative of Investment Advisors Corp., A Registered Investment Advisor. Material discussed is meant for general illustration and/or informational purposes only and it is not to be construed as tax, legal or investment advice. Although the information has been gathered from sources believed reliable, please note that individual situations can vary, therefore the information should be relied upon when coordinated with individual professional advice.