Teaching money management to kids or teens is often an overlooked part of child rearing. It can result from parents not being taught about money as they were growing up, or maybe they do not feel they have the knowledge needed to teach their kids about it. Do you find yourself in one of these categories?
How to teach teenagers about money
Usually, it’s just from not knowing how to start. Many parents just don’t know how to begin teaching teenagers about money, much less how to teach them about budgeting, taxes, or credit cards. Having raised 2 daughters while going through very different financial seasons, I’ve learned a lot about what works and what doesn’t when it comes to helping teach kids the value of money.
Here are 7 things I learned to get you started in your own discussions and help you create money management lesson plans for kids.
1. Do not expect teens to know the basics
Years ago, I went each week to the post office to mail books and my middle schooler would tag along. She learned early on how to mail packages, address labels, and buy stamps.
Meanwhile, in her late 20s and married to a postal employee, my oldest daughter recently called me to ask if she could buy just one stamp at the post office. I could not stop laughing.
It’s a basic thing in the world of adulting, but there is no knowledge if there is no exposure. Don’t take for granted that your teen will automatically know how to buy a stamp. Or, for that matter, where it goes on an envelope. My youngest stepson, age 19, asked that a few weeks ago.
2. Look for those teachable moments
Every encounter you have, from calculating a tip or withdrawing money from a cash machine, can be a teachable moment. The same daughter with the question about stamps, at an earlier age, saw a restaurant billboard sign which said, “4 sandwiches for $4”, and she thought that was the greatest thing ever. Our whole family could eat for less than $5! We explained that the sign was referring to 4 different types of sandwiches, each of which cost $4, and she was disappointed. Still, it was a teachable moment for her, both about advertising and money.
3. Delayed gratification is not fun, but it’s necessary to learn for future success
Kids, teens, and adults have been conditioned to expect instant everything. We have to teach our kids not to eat the marshmallows and be willing to wait. Psychologist Walter Mischel did an experiment in the late 1980s where he studied the amount of self-control in 4 year olds.
He placed a 4 year old child alone in a room with one marshmallow and told the child that if, when he came back in 15 minutes, the marshmallow was still there, the child could have another one. Two out of three children ate the marshmallow before the time was up.
The one child who didn’t eat found ways to distract himself. He thought about the better thing he would have if he didn’t pick up and eat the good thing immediately available to him. This young child was learning one of the rules of being successful—delayed gratification. Teaching kids the value of money can start here; teach them that there are better than just good things waiting for them if they are willing to think about their future.
4. Help your teen open a savings and/or a checking account as soon as possible
Suppose each month your teen could have a visual picture of a growing savings account. In that case, the realization of buying that awesome new (insert what cool thing kids like these days) will be more within her reach. It doesn’t matter what item your child wants to buy; it really doesn’t.
What matters is that she has a goal in sight and is willing to delay purchasing a smaller item in order to buy the bigger one later. This will help her learn to not give in to buying just the good thing but instead saving towards the better thing.
5. Create budget lessons for teens
This also gives them a visual picture of how their money is being spent and saved. There are many programs available that teach money management lessons to kids and teach budgeting for middle schoolers.
Dave Ramsey’s Foundations in Personal Finance (middle school and high school curriculum available online) and Your Money, Your Future (developed by VISA and free online) are fantastic options. Both offer a wide range of interactives to teach kids: learn the value of money, how to save, how to budget, how to spend, and how to invest.
You can also use a simple spreadsheet to create a personal budget with your teen. It shows them how much they earn (either from chores, allowances, or a part-time job), how much they spend and on what, and how much they are saving. Budget templates are available with great percentage charts, easy-to-use cell entry, and automatic calculations. They provide a good starting point for teens to learn how to track their habits.
6. Give them some insight into taxes
I asked all my kids what they wish they would have known more about when they were growing up and this was at the top of the list. When your teen gets his first job, that first paycheck with taxes deducted will catch him by surprise if he’s not already armed with the knowledge. Two resources that are helpful for this are Crash Course Economics videos and Taxes 101from MoneyCoach.
Prepare them with knowledge.
7. Teach them the truth about credit cards
Some financial counselors say credit cards are “of the devil,” and others say you cannot make it in life without one. Our family is in the middle on this one. Credit cards are needed to rent a car and help begin building a credit score, but they can also lead down a path of utter destruction. Deciding whether your teen/young adult needs a low-limit credit card will be a personal decision, but you should definitely talk about it.
Do this before they go off to college because they will be inundated with offers to get credit cards at orientation. Ensure they have the facts beforehand. Because that free T-shirt, water bottle, or food gift card they get for filling out a credit application will be so tempting to a broke college student.
There are many other areas of financial literacy we can cover. Still, hopefully, this list will be a helpful start for you. Take one tip at a time, don’t try to do all this at once. You and your teen will both be overwhelmed. Take it slow and steady, allow their pliable, spongy brains to absorb the information and ten years down the road, they will know how to buy a single postage stamp.
Suppose you’re in a position of financial instability right now due to the global pandemic or any other reason. In that case, it may seem impossible to teach your teens how to best handle money, but now may be the very best time. Teach them how to survive on very little and when they are successful rockstar adults, they will be prepared to thrive with a lot.