There are some things we can tell our kids once (okay, maybe twice) and they understand it. And then their other topics, like money, where the lessons need to be ongoing. I already shared with you how to talk to kids about money, ages 0-7 and 7-12 and today we’re going to focus on teenagers.
I have had the privilege of speaking to many high school seniors about money. Despite their actual interest in the topic—it was clear to me that money was not discussed in the home, nor had they been actively taught how to handle money. They were eager for someone to answer their questions because they all were smart enough to recognize the role money would play in their life. Don’t leave it to chance and hope your kids will make smart choices on their own.
This is one of the first lessons my father taught me. He knew our emotions drove many of our spending habits. And let’s face it—teenagers are known for their heightened emotions, so the sooner you can help them understand how their emotions affect their money decisions—the better off they will be.
The best way to teach them is to demonstrate it. Pick out something you want at the store and tell them “why” you want it. You had a tough day at work; you got into an argument with a friend; you’re tired and need a pick me up. Now remind them how emotions can cause us to spend money recklessly so that’s why you set goals. And even though you feel—mad, sad, glad or bored—you are not going to buy whatever caught your eye. Your goals matter more than any temporary satisfaction this item will bring. Do this regularly.
Success Tip: Make sure your kids continue to set goals. Once they achieve a goal, celebrate then set another goal. Goals are your best defense against emotional spending. It’s easy to spend money when it has no designated purpose, but when it impacts achieving your goal, now you have a reason to not spend your money.
Advertisers also bombard teens with messages that they absolutely must have this or otherwise they are missing out. Don’t dismiss their feelings because that just makes them think they can’t talk to you. Instead, share with them a time when you tried to keep up with the Joneses and the outcome. Yes, this is the time to bring out a few of your money skeletons. Let them see what they are feeling is normal but keeping up with the Joneses creates a whole new set of problems. The better choice is to figure out what you want and work towards achieving it.
Success Tip: Have your children figure out the one item they really want and find a way to earn money to buy it themselves. Not only is this a good experience for them but also helps them correlate hard work with earning money for things they truly want.
While we aren’t to this point yet, I plan to open a checking account and give the girls a credit card, even if it’s a prepaid card funded by me, when they turn 13. The girls already know credit cards are not free money, but it is still different when you actually have your own credit card and the ability to spend money you don’t have. I want them to experience this while I still have a bit of control and any mistakes they make won’t carry the same weight if they were on their own.
Success Tip: We all know the dangers of credit card abuse, but at the same time don’t make your kids fear them or think someone is bad for using them. This is not true. The mistake that happens is most people don’t understand the risk associated with carrying credit card debt and the impact it can have on their financial well-being. This is what you need to teach them.
While I don’t think you need to go into the nitty gritty details of investments and the stock market, you do want them to become familiar with a few terms and concepts and most importantly—understand it is something they will need to do.
I’ve already explained compound interest to Lauren and she regularly confirms with me that we pay off our credit card bill every month so “we don’t waste family money on interest charges”. Explain to your kids when compound interest benefits you, investing and savings, and hurts you, credit card interest charges. We’ve also hypothetically invested in companies so she could experience market volatility but also see the potential of investing.
Success Tip: One of the biggest regrets I see is people wish they would have started investing when they were younger. Take your kids through some exercises showing them the cost of waiting to invest. With older kids, you may want to talk to them about a 401k, so instead of tossing that paperwork aside when they get their first job out of college, they instead fill out the paperwork and start investing.
This has already been alluded to in many of the other lessons but make it crystal clear to your kids at this age that debt should not be considered commonplace. Walk them through when it may be appropriate to leverage debt, such as attending college, buying a home or starting a business, but to also understand that all debt has risk and to carefully consider the risks before taking out a loan. It’s important to teach your kids how to think about debt, so they know when to leverage it or avoid it.
I hope these guides have been helpful to you and make starting these important conversations with your kids, whatever their age may be, a little bit easier for you.
In case you missed them, here are more How To Guides: Tips to Talk to Your Kids about Money (ages 7-12) and Tips on How to Talk to Your Kids about Money (ages 0-7).
Shannon
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SHANNON RYAN, CFP®
I won't be giving out a credit card for another couple years when Marisa goes off to college but I was thinking along the lines of a debit card because I'm afraid she might get a little crazy with a card being in a new dorm and all. You know how easy it is to get caught up in all the excitement of a new place away from home and wanting to spruce it up :).
When my son brought home his employee packet we talked about the 401K program. He was too funny thinking it was only for married folks but I explained how it works and he enrolled in it. :)
All in all I'm trying my best to give advice I didn't get so they don't make the same financial mistakes I did.
Great post Shannon! Hope you're off to a great start of the week! Happy Monday!