Teaching teenagers about money is a completely different challenge than broaching the issue with youngsters, for two primary reasons. For starters, while young children tend to cry or whine when they don’t get the latest movie-themed toy, they generally forget about this disappointment quicker than teenagers who have constant peer pressure to have the latest gadgets and fashions (which, incidentally, are more expensive than most toys). Secondly, teenagers have a better ability to earn money by babysitting, tutoring or doing odd jobs than younger children do, which means that their approach to money must relate not only to how they spend your money, but how they spend their own.
Perhaps the most difficult part about teaching your tweens and teens about money is the fact that you’ll need to share a part of your personal finances with them so that they can understand your lessons. If you are living a debt-free lifestyle, for example, you may want to show your child how you balance your checkbook and how you limit your expenses based on your income. Illustrate how you choose your cell phone provider, brand of cereal and weekend activities based partially on your budgetary restrictions.
If, on the other hand, you are living with credit card debt or other abnormal loans, don’t be ashamed to show your child this side of your finances. This may be one of the strongest lessons that you can provide, because not only will it help your teenager understand when you say no, but it may inspire him not to fall into the same situation.
Sharing your budget with an older child can also yield other tangential benefits – if your child sees how much you spend on electricity or heat, he or she may be more conscious of using and abusing these utilities.
Another issue surrounding teens and money is the question of whether you want them to earn some of their own money by working or doing chores or both, and whether you want to let them spend this money or save it. If you plan on making your teenager pay for part or all of their own college tuition, let them know as early as possible so that they can start saving for this expense. If not, consider letting them earn their own money and encourage them to save part of it for ‘someday’ – whether that’s for wedding expenses, traveling or splurges down the road. Many teenagers are hesitant to give up their ‘downtime’ for work, but if you sit down and explain the needs and benefits of working you can motivate them to work some weekends and relax on others. In fact, one can argue that the relaxing weekend will be even more enjoyable when it is doubly deserved.
Finally, it’s a good idea to teach your teenagers about interest and investing. Most teenagers are happy to learn that their money can grow just by sitting in the bank. However, if you’re familiar with the market and your child shows interest, it may be worthwhile to let him or her pick some stocks for small investments, and let him follow the market and choose an investment strategy. Even if he loses a few dollars, the lesson is a good one, and should help him have a better appreciation for the money that remains.