Jul 03, 2018 / Money Tips
Ever since the time you first hefted the car seat into the grocery cart, your kids have been watching you use money. And now that they’re growing up, getting summer jobs, and spending their own money, there’s no better time for your kids to learn the valuable lessons of financial literacy. Use these tips to bring your teens into the conversation about your family budget.
The groceries go over the scanner, the card comes out, and the groceries go home. At some point, children become aware that money is changing hands. But without a parent explaining what’s happening and why, kids sometimes approach their teen years without ever understanding the relationships between a credit card, a debit card, and a bank account, or how any of them relate to the family budget. Don’t expect your kids to learn money matters by osmosis. Put out a plate of cookies, invite your teen to sit down, and explain what you’re doing as you pay bills. Point out which card you’re using as you shop and why. Think aloud as you compare prices and assess value. If you give quick, simple, casual descriptions of what you’re doing as you do it, and answer questions as teens ask them, you’ll help them create a framework that more complex ideas can to attach to.
Help teens know how to read a paycheck, how to see how gross earnings become take-home pay, and how take-home pay gets divvied out into the family budget. Talk about savings, retirement, and insurance. Then give them a broad-stroke understanding of the family budget so they can see how quickly phone, heat, light, Internet service, TV, and insurance bills add up. Let them see how much groceries cost, and how a family dinner out compares to other activities. You’ll be giving them a valuable tool they can use to create their own budgets in the future. And as a bonus, you just might help them realize that money isn’t limitless, and that every purchasing decision represents some sort of tradeoff.
All teens should be managing some amount of money, even if they’re not earning it from employment just yet. If you’ve been paying for clothes and entertainment, for example, you can call that amount an allowance and gradually shift the responsibility for those purchasing decisions onto your teen. Sit down together and set up a personal budget—which they should understand is similar to the family budget—that accounts for income, savings, and the expenses you expect your teen to be responsible for. Look for chores your teen can do to earn additional money. They’ll soon learn about the tradeoffs they need to make to afford the things they want. When you think the time is right, graduate your teen from a cash system and set him or her up with a checking account you can supervise.
Teens who understand debt and the cost of money become adults who are less likely to get into borrowing trouble. Explain interest and the way it compounds so they can see that the longer they take to pay off a debt, the more the original purchase will cost. Open a conversation about good debt versus bad debt by asking them to think about comparing the merits of, say, a college education to a new car. Teens need to understand debt so they can use it wisely for things that will deliver lasting value, and avoid taking on high-interest debt for incidental purchases.
As you discuss the family budget and the way you handle money with your teens, you’ll be giving them an education that will have application every day of their lives.