Teaching about money takes a certain amount of finesse. We all have very personal and volatile relationships with our paychecks and bank accounts, so generic financial advice usually doesn’t cut it. Lessons should resonate, as each person will find their own path toward fiscal responsibility.
In no situation does this prove truer than when trying to explain money to teenagers. Teens, if you’re reading, I mean no disrespect. For the most part, it’s the fault of parents and a society that encourages spending more than saving. If you think your teenage son or daughter doesn’t handle his or her money well, you might want to take a quick peek at your own habits. Any chance you’re setting a less-than-perfect example?
Point is, we have to do a better job teaching our 15-, 16-, and 17-year-olds about money. Because when they turn 18 and flee the nest, the lessons come by way of real-life experience, and most of the parents of today’s teens learned about student loan and credit card debt the hard way, by absorbing massive amounts of it.
It’s not just about what we teach children and young adults, but how we teach them. It can’t sound condescending and needs to account for experiences and interests and things some adults might not understand. The moment we get dismissive about what a teenager wants to spend his or her money on, the rest of the advice will fall on deaf ears.
So, while these tips are to be delivered to teens, my hope is to help parents understand how to convey them effectively. No teacher should ever blame the student for not understanding something; it’s the instructor’s job to make their point understood.
I’m not asking you to lie about this - clearly I know debt doesn’t last forever, and no teen will fall for it if you tell them it does. However, 99% of the time outstanding balances last far longer than the borrower expects them to. I’m hopeful that all the millennial parents who have children approaching their teenage years will be able to draw on personal experience when explaining student loan debt. That’s not something the Boomers were able to do and it’s created a very real debt crisis.
When breaking down how credit cards, leases, and student loans work, explain the interest and show how it compounds. Do the math to show how long it will actually take for minimum payments to get rid of $5,000 in debt. Don’t speak in platitudes and generalities, and instead say, “You’ll be 35 before this debt is gone. That’s halfway to 70.”
When I was younger and fell into debt, it was because I had no concept of negative money. If I had cash, I could buy things, and if I didn’t, I couldn’t. Credit allowed me to do the buying, and only then did I learn the terrible effects of owing a lender who charged for the money borrowed. Now I know that debt causes lasting pain, and I’m very committed to budgeting and saving responsibly so I never have to live through those troubles again.
In the right situation, I think young adults and teenagers should find part-time jobs. At the same time, I know how important school, sports, and other hobbies are for young people. A work ethic won’t necessarily be cultivated by forcing a teen to work instead of enjoying their youth.
For someone earning a bi-monthly paycheck, tracking income doesn’t require much calculating. For a kid who might work sporadically or rely on allowances and birthday gifts for their capital, the math becomes a little trickier; there’s less money in play, it arrives sporadically, and it will be much harder to avoid spending it.
In adulthood, the goal inevitably becomes to make more in hopes of worrying less. For teens dealing with school, hobbies, and the social stresses of adolescence, comfort can come in the form of knowing what to do with what you have. Know your limits and don’t compare your income to that of a wealthier family or someone with a better job. We should all be able to find more contentment in the money we have, so learning this early can have a profound impact going forward.
Instant gratification isn’t a new phenomenon, we just have more technological shortcuts to get us there. When you reflect back on your childhood, thinking ahead never even registered. You wanted a cookie in the afternoon even if it meant no dessert, then threw a fit when you got nothing after dinner.
Few things in life offer more immediate thrills than spending money, so it shouldn’t surprise you when a teen takes his or her allowance and heads off to spend it post-haste. The next day they’ll feel broke, but somehow the dots between spending money and losing money doesn’t always get connected.
Simply telling someone to save their money, especially a younger person dealing with some rebellious tendencies, doesn’t have that much resonance. Why? What good is money unspent? Aside from convincing a 16-year-old to save money for their very own car, it can be pretty tough to give a younger person a compelling reason to save. Retirement, college, and real estate aren’t necessarily going to motivate a teenager to stash their earnings.
You might see better results if you stick to the basics: save your allowance this weekend and you’ll be able to spend twice as much next week. Does that mean the next purchase will be a financially responsible one? Probably not. But the more expensive thing will feel more impressive. It will show how something unaffordable with just one week’s earnings can become attainable with a little bit of patience. You might have to offer encouragement and provide some subtle pressure, but providing a path for hands-on experience with the benefits of saving can go a long way.
With lessons learned about short- and long-term gratification, you can propose loftier and more meaningful goals. Cars, vacations, and big-ticket items should be made to feel within reach if your son or daughter is willing to show some financial restraint. There’s no sense in teaching frugality for frugality’s sake, but instead showing how rich one can feel if they respect the money they earn.
When you get older, a plush IRA and a rental property sound pretty enticing. In my experience, 15-year-olds don’t have much interest in retirement accounts or becoming landlords. So you can beat the drum of savings and earning interest and putting money to work as long and loud as you want, but the goals have to align with the interests of the person you’re talking to.
Planning to spend, even if some of the spending seems to border on frivolity, still teaches an important lesson about debt and money management. Everywhere you look, credit companies and retailers are begging people to buy products with cash they don’t have. Instead of learning to save, young adults learn to play catchup as they get sucked into a cycle of debt. If you think you don’t want your son buying a $600 leather jacket, think about how angry you’d be if he bought it on credit.
In the long run, you’ll teach more by helping to set the goals instead of trying to dictate what those goals are. Act as a role model, try to inform and influence, but don’t lose sight of how important goal setting can be even when the goals seem a little off track.
Some goods cost a lot because of their quality and intrinsic value. Other items are expensive because clever marketing directors tell us we should pay more to have that product in our home. Adults may try to pretend that teens are more susceptible to this kind of advertising, but let’s be honest: it works on just about all of us.
From the groceries we buy to the matinees we go to, a shift in priorities can save us a heap of money. To get there, we have to fight our inclination to go with the perceived best option. It takes some work since it’s hard for an impressionable youth not to care what people will think and say about knockoff shoes or second-hand clothes. However, it only takes a little while to notice the financial gains. At that point, even teenagers can become more interested in bargains than other people’s opinions.
Teaching this isn’t easy, so you should do your best to lead by example. Make it known when you save money and talk about where those extra funds will go. If possible, turn some savings into a fun night out with your kids and make sure they know where the dinner money came from.
Some things will always cost top dollar, and that’s an important part of this lesson as well. Try to teach when bargain shopping makes sense and when you have to buy something that will last. These are all components of an education anyone needs in order to understand wealth.
One of the simpler tricks for helping teens care about their savings is putting them in charge of some decision making. You can tell them which bank will house their money, or you can present some options and let the choice be theirs. Who knows, you might end up transferring your money to whatever up-and-coming institution they choose.
Teens care passionately about so many things, so to assume they don’t have an opinion about where they put their money would be a mistake. Some may love the idea of a local credit union connected to the community; others might target the online option with the lowest fees and best interest rates. In any case, they’re destined to have more interest in where their money goes when they have a say in the process.
If you make a list with a small handful of choices and look over the details together, it’s a guaranteed learning experience for all parties. And with banking and money management being such a personal affair, providing options will help your child learn some of the nuts and bolts of how checking, savings, and credit accounts work for different people.
It’s amazing how many teens I see every time I go out to eat. I know many of their parents and I’m sure those kids aren’t working lucrative jobs, so how on earth can they afford to buy so many meals? The answer is pretty straightforward: food is the only thing they spend money on. This is fine when you’re young and your needs are minimal, but it’s a very dangerous habit to embrace.
Maybe you have a teen who wants to cook his or her own food, in which case you’ve won the lottery and should nurture that constantly. If your kid longs to eat fast food with friends every chance they get, some gentle urging to eat at home might be in order. Parents and children need to work together on this, with your checkbook taking on the responsibility of keeping teenage mouths fed. Grocery shopping together might help, or just setting some guidelines for how many meals can be eaten out each week.
At the end of the day, the conversation comes down to worth. Ask if it was worth it to spend $10 while free food sat uneaten in the fridge at home. Some days the answer will be yes, it was totally worth it. Other days, regrets about money spent on overpriced fries will stand as a valuable lesson. You might not get the answer you want in all of these discussions, but hopefully the question will inspire some thoughtfulness before the next meal.
Contrary to everything you might feel in the moment, you don’t need to buy stuff. If people did a better job accepting this truth, we’d all spend far less time feeling bad about all the useless gadgets we own. Doubt isn’t usually a good emotion, but when it comes to unnecessary purchases, it’s what we should heed most.
Very rarely do people have flashes of anxiety after not buying something. Perhaps a hint of regret, but then you go on with your life knowing you still have the money you chose not to spend. If your child buys something and then has second thoughts, encourage them to return the item if possible. They’ll get an immediate cure for the spending sadness and will hopefully take note of how much better they feel after reversing the decision to buy an unneeded item.
Through the years, you’ll have plenty of chances to deal with this. In the moments when teens decide not to buy something they don’t need, show a little praise for the decision. When the opposite happens and your kid is wallowing after a bad purchase, offer a shoulder to cry on and a little advice for the next time a similar situation arises.
No parent will have a one-time conversation in which their teenager learns everything important about money management and only makes good choices thereafter. This will be an ongoing process with plenty of ups and downs, so the best you can hope to do is keep the ship steady. Think about the points you want to convey and try different tactics for getting these tips across. The efforts you take will pay off in a big way as your teen becomes an adult and money starts to take on a whole new meaning.