Finance Lessons for Your Teen

The current economic environment has caused most everyone to reconsider their personal finances with many people having to drastically change their spending and savings habits. Out of this economic malaise may come an opportunity to finally instill the right habits in your teens that can carry them into adulthood on the right financial footing. Just as our parents and grandparents of the Great Depression era developed deeply ingrained attitudes about finances from their experience, our teens can share in the lessons of today’s “great recession” generation. The first step is to make your teen a partner with a stake in the family financial enterprise.

For most teens, it’s not about the money. Not yet anyway. It’s more about what the money can get them – weekend entertainment, clothes, toys, cars. Money, no matter its source, is simply the means for what is important to them. When the family goes through a “belt tightening” it may be an opportunity to turn these teen expenditures into teen motivators for learning about budgeting, savings and smart financial management.

Get Them on Board

Teens have a stake in the family’s financial picture so it is important to communicate to them the family’s goals (especially as they relate to the teen), the current situation, what has changed and why, and their role in the new financial plan. It doesn’t necessarily mean that what they have been enjoying will suddenly stop. Rather, they need to become more accountable for their expenditures and begin to gain a sense of satisfaction from smart financial management.

• Have them set their own goals and priorities. It’s a good time to start them with a financial journal for budgeting and record keeping. Some teens might respond will with a software program such as Quicken or Microsoft Money. Get them to distinguish between needs and wants and then prioritize
• Have them develop a budget based on their priorities and other goals. Some teens are looking ahead to be able to buy a car or finance a trip. Their savings for future needs or wants should be a part of their budget. Both the expenditure side of their budget and the revenue side should be negotiated to the point where everyone signs off on it.
• Have them establish a relationship with a bank. Have them meet the bank manager, set up a savings account and issue them a student “bucks card” as their spending vehicle.
• Have them want to save. If they understand that their wants will need to be financed, in part, from their savings, they will soon see the value in it. You can further encourage their saving habits by applying a “match” to their savings, much like an employer match to a 401(k) plan. The match can be applied monthly or quarterly. You could put withdrawal restrictions on the match portion so that they become “long-term” savings.
• Show them how they can be a millionaire. Teens have aspirations and dreams just like adults and, given the chance they will share them with you. Show your teens how they can become a millionaire by the age of 40 by saving just $250 a month starting today.

Teens are adults in training and, given the opportunity, they will demonstrate increasing amounts of responsibility and a penchant for smart financial management. Certainly they can be motivated by their own wants and needs, however, when they begin to see the vital role they play as part of the family financial picture, they may surprise you and exceed your expectations.