10 Money Tips for Teens
If you have teenagers -- or you remember being one -- then you've probably noticed that managing money can be challenging, even long before adult responsibilities like mortgages enter the picture. That's because teens are usually faced with tight budget constraints and lots of wants, ranging from the latest sneakers to nights out with friends.
Teens also have a hard time saving for some distant future that seems impossibly far away, so convincing them to set aside a portion of their spending money can be difficult. If you'd like to help instill strong financial habits in your teens now, and help them avoid the headaches of credit card debt and other problems later, then a handful of new books are here to help.
Susan Beacham, founder of the financial education company Money Savvy Generation, co-wrote "O.M.G.: Official Money Guide for Teenagers" with her husband Michael Beacham. "The problem young kids and those in their young 20s have is that money is abstract, and it will get increasingly abstract," she says, referring to technological advances like online payments. "We really need to get into their heads again and again about your choices, how do you spend wisely, what's a want and what's a need, because they need to protect themselves."
Teacher and personal finance author Danny Kofke wrote "A Bright Financial Future: Teaching Kids About Money Pre-K Through College for Lifelong Success," and his daughter Ava Kofke, age 10, published her own money book, "The Financial Angel: What All Kids Should Know About Money," aimed at kids her age and complete with games and cutout cartoons. "I felt like if kids wanted to read a book about money, maybe if I wrote one that was a little shorter than my dad's, with just the basics, they would read it," she says. Just because your parents have money problems, she adds, you shouldn't have to follow in their footsteps.
Kara McGuire, a money columnist and consumer strategist, wrote "The Teen Money Manual" because she thinks there's not enough information geared to people when they're young, before they have money, so they get off to a good financial start. "One thing that's always driven me nuts is that we only start paying attention to people once they have money," she says.
Here are 10 suggestions from these money authors that will help your teen get his or her finances off to a solid start:
1. Be open.
Danny Kofke says a lot of people get into trouble by being secretive about their money with their children. "Talk to your kids about how much you make and your expenses each month. We say, 'This is how much we have a month -- and we pay for the mortgage, TV, the bills, food -- and this is what we have left over at the end,'" he says. That way, he and his wife use their budget to explain why they can't buy a new toy or electronic gadget.
2. Share real-life examples.
One Christmas at the Kofke house, Ava really wanted a Nintendo DS, but it was too expensive for the family budget, so she didn't get it. A few days after the holiday, the Kofke's home heating system broke, and the repairs cost about as much as the Nintendo DS. "I showed her, 'Look, this is what happens. If we had bought this, we wouldn't have had the money to pay for [the repair], and we would have had to put it on our credit card,'" he says. That helped his daughter conceptualize the idea of emergency savings and how it can come in handy.
3. Get them a debit card.
This tip might be controversial, Kofke acknowledges, but he recommends it because he thinks it's important for teens to have experience handling both virtual money and cash. A debit card will allow teens to see whether they spend money more easily when it's virtual, and they can prepare to take extra care when using credit cards as they get older. "[Society is] almost going cashless, so I think it's OK to start letting them experiment with a piece of plastic, but not a credit card," he says.
4. Encourage them to make some money.
Even young kids can earn money for helping neighbors with yard work, as McGuire's 8-year-old son has done, and practice saving birthday money, as her 5-year-old son does. Her daughter, who is almost 11, is also starting to earn money baby-sitting. That kind of entrepreneurial practice can help them get comfortable with making and managing their cash.
5. Start the savings habit.
McGuire says getting into the habit of setting money aside when you're young can set up a lifetime of healthy saving. "It's especially important for this generation. We know college is more expensive and careers are taking longer to build," she says. Saving for the future can be an abstract concept for teens, but parents can involve them in conversations about saving for college to help them start thinking about it. "Kids need to get much more involved in the family conversations around college costs," she says.
When medical forms at the pediatrician's office ask for your Social Security number, Beacham says you should explain to your teen why you are leaving that section blank -- because Social Security numbers should only be shared when absolutely necessary. "My kids will say, 'No,' and put a line through it, because that's what I've taught them from day one," she says.
7. Write down their needs versus wants.
Beacham suggests encouraging teens to write down their needs and wants on a piece of paper to help them prioritize how to spend their money. That central tenant of budgeting can help them move closer to their goals, whether it's owning a new pair of trendy sneakers or going out with friends for pizza on Friday night.
8. Help your teen think about her goals.
Beacham says teens should be really specific. "Don't say, 'My goal is to have fun.' Say, 'I'd like to go out for pizza with my friend next Saturday.' Let's set goals and be specific. Then let's do some planning on what money you have coming in and what can be set aside to meet your goals," she says.
9. Give generously.
Ava Kofke says her favorite money lesson from her dad is giving. "Even though [my sister and I] don't have a lot of money, we would give 10 percent of our money to church, or bring cans of food in," she says.
10. Let them make mistakes and pay the price.
Some lessons, like investing in a diversified portfolio or having an emergency fund in case of a car accident, are difficult to learn until you learn them the hard way. "It's all about having your own skin in the game. It won't be until their first car accident and they're paying the $1,500 bill that they really get it," Beacham says. That's why it's important for parents to know when to step back and let their teens struggle and handle unexpected expenses themselves.
Some lessons need to be learned firsthand, even if it's painful.
