Finance Lessons For Your TeensSubmitted by MD Wendell Wealth Partner on August 2nd, 2016
By Mark Wendell
The current economic stagnation environment has caused most everyone with children to rethink their personal spending and saving habits. Out of this economic malaise may present an opportunity to instill the right financial habits in your teens that can carry them into adulthood. 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. If the family goes through a “financial change” it may be an opportunity to turn these teen expenditures into teen motivators for learning about budgeting, savings, investing, and smart financial management.
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 may have 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. Having a participatory role in the family budget is an important step in their development.
- 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 better with an App on their phone. Get them to distinguish between needs and wants and then prioritize
- Have them develop a budget based on their priorities. 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 and meet the bank manager. Have them set up ‘savings’ and ‘spending’ accounts. Have them contribute to a college savings account or a college 529 plan. (www.savingforcollege.com)
- 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.
- Show them how they can become wealthy on their own. 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 - $300 a month starting now.
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.