For many parents, talking to their teenagers about money is even more uncomfortable than the “birds and the bees” talk. But the truth is that as your children grow into adults, few things are as important as their relationship with money.
Teenagers live in an in-between world in which they’re old enough to earn their own money but not old enough to make all their own money-related decisions. They can grasp complex concepts like interest and debt, but it’s hard to really understand the gravity of financial choices until you have experienced them yourself.
On top of all this, your teen is probably about as interested in retirement as they are in Jimmy Buffett. But all great journeys start with the first step, so here are three ways to introduce your teen to fiscal realities and get them to think about their financial future.
Be open with them
Honest discussions about finances can help make abstract money matters more concrete. These conversations can be intimidating, but you don’t have to be an accountant to provide meaningful insights.
Sit down with your teen and write out your budget for one month. Let them physically see your plan: how your expenditures relate to your income and how much you’re able to save. This will give them a frank sense of how much things will cost once they’re in the driver’s seat.
Refrain from turning the conversation into a lecture. Your teen will appreciate being spoken to as though they are an adult, and simply engaging in this topic will help eliminate some taboos around money, making it easier for them to reach out for help when they need it.
Make it real
From here you can hit more complex topics, like interest. Pick something your teen would really like to have some day, like a sports car or an extravagant vacation. Help them research costs for the item, then show them how they could take out a loan to help pay for such an expense over time.
Work together on some different online interest calculators using realistic loan amounts, terms and interest rates for the desired item. Having a tangible goal in mind will give these numbers meaning and allow your teen to see the huge impact of interest, both in terms of cumulative cost and time.
Encourage your teen to get a part-time job
A part-time job will give your teen the opportunity to make a few bucks and teach them a myriad of valuable life skills.
Something as simple as mowing lawns or babysitting for a few hours a week can lay the groundwork for attributes that will come in handy throughout their lives — like being responsible, punctual and having solid interpersonal skills. But the most important thing they’ll learn is how much it takes to earn money — and how easy it is to spend it.
When they get paid, you may want to let them have financial independence, but make sure they’re still cognizant of their cash flow. A great way to do this is to open a checking account together and go over the bank statement each month. This will also provide perfect opportunities to discuss long-term financial goals and have more hands-on conversations about money.
This is the second part in a series of articles on talking to your children about finances. If you’re looking for beginning financial literacy concepts, click here. If you’re ready for a challenging financial activity you can do with your teen, click here.