It’s never too late to raise your financial IQ, and it’s definitely never too early. If you haven’t taught your teen anything about money, there’s still plenty of time. The idea is simply to give them a good financial foundation before they leave home.
Once your kids hit the teen years, they already have some ideas about how money works. This is the time to squash any myths they may believe, and plant the seeds that will foster financial freedom.
There are several ways to teach teens about money. Here are the main areas we’ve focused on with our kids.
While responsibility is part of the basics, I saved that for a separate section. When I say basics here, I mean the things you do everyday that you may not think to teach your teen.
Here are some examples:
- How to use an ATM
- How to count change
- How to calculate a tip
- How to check in at a hotel
- How to rent a car
- How rent and deposits work
- How to pay a utility bill
- How to write a check (yes, today’s teens still need to know this)
Once your kids hit 14 or 15, start letting them see you do all of these things. Walk them through the process as you do it, and tell them what you’re doing along the way. I worked in customer service for years — you’d be surprised how many kids don’t even know how to pay for food at a restaurant.
We take the things we do everyday for granted, because we’ve been doing it for years. Don’t forget that your child has likely never done any of these things. It’s our job to let them see it when we do it.
Likewise, don’t hide your finances from your kids. There’s no reason to, and you’re only going to hurt them in the long run. The Baby Boomers didn’t let their kids in on the family finances, and it showed in the irresponsibility of my generation.
Opening a checking account for your teen is a great way to help them understand money management. Saving for a car is a great way to teach delayed gratification, so a savings account is also a good idea.
There are many ways to raise a financially responsible teen, and it all begins with giving them control. By now, they should be spending their own money, and not asking mom and dad for a handout anytime they want to buy something.
They’re ready to create their first budget, even if it only includes a few things. It will be easier to slowly add more as they enter adulthood, than to start budgeting when they’re 25 and overwhelmed with 100 different bills.
Your teen is also probably looking at getting a job, if they don’t already have one. Work ethic is something to be instilled by the parents, through the job your child accepts.
Debt and Student Loans
The “debt talk” is one of the most important talks you can have with your teen. Explain the dangers of debt, and how it’s always best to avoid it.
Go over all of the ways your teen can go to college without getting into any debt at all. Their friends may be acquiring student loans like it’s the only option, but your child will know better.
I already covered how to get a debt-free degree here, but basically, they have five options:
- Save for college
- Apply for scholarships
- Apply for financial aid
- Work through college
- Join the military
Those are the most basic and easiest ways to get a degree without the debt. When you combine them, it’s easy to see how someone can get a degree without taking out a single loan.
Student loans won’t be the only attacker, of course. From the first day your kid steps foot onto a college campus, if not earlier, debt offers will run rampant. Your kids need to know the dangers of debt before they’re ever offered their first credit card.
“No one has ever become poor by giving.” – Anne Frank
Giving is taught. Generosity has to be instilled in your child. From tipping a server to giving to major charitable projects, giving is part of life, and an important part.
While “give and you shall receive” is true, giving for the sake of giving, and to get nothing in return, is important to grasp.
Teach them about tithing, or rather, generous giving.
All of our money belongs to God, we merely keep a certain percentage. And no dollar given is ever regretted. Giving isn’t always a natural tendency, especially for the “saver” type, but like almost anything else, it can be taught.
Generosity isn’t just about giving to your church, or feeding the homeless. It can be so much more than that. There are countless causes where money is needed. You can give your time and services, but sometimes the cause just needs money.
If your child only gets one lesson before leaving home, let it be the lesson of generosity.
Related Book Reading
- Smart Money Smart Kids by Dave Ramsey & Rachel Cruze
- The Teen Money Manual by Kara McGuire
- The Motley Fool Investment Guide for Teens by David & Tom Gardner
Over to You!
- What have you taught your teen about finances?
- What do you think is the most important lesson?