Show Me the Money
Whether your teen is earning their own money or thinking about their future independent spending, you can help them grow into a fiscally responsible adult—here’s how.
Do you remember how you first started learning about money? Setting up a lemonade stand? Babysitting? Mowing the neighbor’s lawn? Weekly allowance? Or maybe just watching how your parents dealt with household expenses?
Our upbringing plays a big part in shaping our relationship with money, “because our kids see everything that we do,” says Jeff Forrester, parent, mentor, and co-founder of Hi-Lite Coaching & Consulting.
Any parent of a teen knows that talking to their child about, well, anything can be challenging. But that doesn’t mean parents should skip those hard conversations, especially when it comes to managing money, dealing with credit, or sticking to a budget. But how can parents broach this sometimes-tricky subject, sans eye-rolling?
If you’re Erica Jackson, you sign your 15-year-old daughter, Sydney, up for a Financial Literacy summer camp intensive—and live with the attitude.
“We’ve been doing summer camps since Sydney was 5, so she’s done all the traditional options. I think she was hoping for a summer off, but this was something out of the ordinary. Finances affect almost every area of adult life, so we wanted Sydney to have a solid foundation. We have a very open household and we’ve always referred to Sydney more as an adult than a child, so she understood that you have to work to be able to afford the things you want. But this program was unique in that it was built with teens in mind. So, we didn’t really give her an option,” Erica laughs.
Sydney says, “Yeah. Initially, I was like, there’s no way I’m doing this. Although it was only once a week, it was four hours a day in some classroom learning finances. But my mom was like, ‘No, it’s very beneficial. You have to learn this stuff.’ And she’s right. Where else would I learn it? They don’t teach that to us in school. So I went, and from the first session, I thought, ‘Oh, this isn’t too bad.’ Plus there were some other girls there my age, so that helped.”
The program covered everything from opening bank accounts to budgeting, taxes to investing, credit scores to school loan applications.
“It was really fun and informative,” says Sydney. “Probably the most interesting information was learning about taxes. I didn’t realize that at the end of the year, there’s so much you have to report, and that they take taxes out of your paychecks. Oh! And budgeting. That has been really good to know. So you know how to comfortably live without worrying, you can pay this bill without stress. Plus you’re more organized overall.”
A year later, Sydney uses her budgeting skills weekly, assessing the income she brings in from her tutoring job and allocating it so that she can save for big purchases, have some spending cash, and even invest in stocks.
“I have money invested in Apple and Amazon. My dad helps me with that. He’s big in investing. Sometimes I get confused, but I’m beginning to understand the importance of waiting. Don’t just sell when it gets negative. You have to wait. And then you sell your shares. There are just so many ways to make money like this. You’re not even really working. You’re investing and you can make so much money. It’s confusing, but fun.”
Fun is the operative word, Jeff emphasizes, especially when working with teens and young adults. “Kids want to learn, but they’ll do it in their own way. They’re always learning, whether they are watching us, their parents, coaches, friends, teachers, mentors. They’re absorbing what they see, even if they don’t react or interact,” says Jeff. “So it’s so important to meet them where they are. And this generation sees finances differently than we did. Money isn’t cash anymore; it’s chip money. Digital money. The value is different when you hand a kid a card, and mom or dad reloads it each week.
Which is exactly why a course like this is so important. Establishing a firm foundation about credits and debits, taxes and fees. And budgeting. More specifically, what it means to live within your means. If you hand your teen a bank card and tell them to go to the movies, they aren’t thinking about what that means to their budget. They just assume the money is there. If we can begin to build a solid fiscal foundation at 15, 16, or 17, think about how much healthier they will be when they go to college. For a kid like Sydney, to be investing at 16 years old? To be working with a budget? That’s incredible!”
By the Numbers
of teenagers receive allowances for doing chores.
SOURCE: Junior Achievement
1 in 5
teens have started investing. 55% say “investing is too confusing” and 47% says it feels out of reach.
SOURCE: Fidelity Investments
of teens making money have started saving and storing their money in a bank account.
of teens are concerned about not being able to afford living on their own.
SOURCE: Junior Achievement
of teens think they’ll have $100,000 in savings by age 30.
SOURCE: Junior Achievement
Tools for Success
Much like the other milestone “talks” you’re bound to have with your teen, teaching them about finances starts with an open conversation. “Having honest conversations about money and finances and giving kids skin in the game can really go a long way to building financial independence,” says Jeff. Here are four ways to start:
One of the most effective ways to teach the concept of budgeting is by sharing yours.“Sharing the reality of your family budget can help your teen grasp key financial concepts such as delayed gratification for those things that matter most, and thoughtful savings,” says Jeff.
For example, for every dollar your teen earns, give them three different buckets to allocate their funds. “An easy way to think of this is to follow the 50/30/20 rule— 50% going toward essentials, 30% personal spending, and 20% savings—an easy budgeting guideline that can be followed at any age.”
Setting Up Bank Accounts:
Just like losing a tooth or learning to drive, setting up your teenager’s first bank account is a rite of passage. Parents, you probably don’t want to connect it to your own in case they overdraft their account or their identity gets stolen. But you will want to be the signer on the account so you can see their spending behavior. Remember: This is a great opportunity to teach them how to reconcile their account, keep track of spending, and learn to save.
Wants vs. Needs:
One of the most important steps in teaching your teen about budgeting is discussing the difference between wants and needs. Again, keep it simple. Explain that a need is something that’s required to survive, such as rent payments, while a want is something you can live without, like a Netflix subscription.
Start by making a list of expenses. For each one, ask them: Is this something you can live without? This process can help them sort through needs and wants on paper. But you can also use real world examples or experiences. Back-to-school shopping can be a chance to discuss what’s necessary and what’s not if you have a limited budget.
Saving and Spending:
If you want your teenager to grow into an independent, responsible adult, you’ll have to show them how to save. It starts by not giving them money for every little whim. (See wants vs. needs!) Teaching them how not to spend money is also critically important. Just because they have money doesn’t mean they need to burn a hole through their pocket.
Teach them about having long-term savings goals. At this age, all they can probably talk about is getting a car. Work with them on creating a plan for their money: what they need to buy a car and what they need to save. Early exposure to goal-setting helps to give them patience and vision, two things they’ll need in life.