Financial Matters

8 Tips for Teaching Teens about Money

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  1. Teens should be taught to respect money and its value. Since most people use alternate forms of currency few children even see a dollar bill or a penny anymore. With money being less and less physically tangible, it is easy to not fully appreciate how difficult it is to acquire money and how carefully it must be spent. How many kids think money comes from the ATM or a credit card? As parents we must instill the value of working to earn money. With a federal minimum wage of $7.25 how long would one need to work to afford the newest toy/electronic/shoes? Putting these purchases in the perspective of hours worked will help teens understand the value.


  1. Not all money is meant to be spent, some should be saved. Help your child decide how much money should be spent and how much should be saved. Teens who are taught to save some money for a later purchase or opportunity will learn patience and delayed gratification. Two important skills necessary for future successful money management. A general rule is to save 20% of what they receive or earn. Helping them to calculate how much this is and why it is important is a valuable lesson parents can teach.


  1. Teach teens to spend wisely. My mother used to say that “money burned a hole in my pocket.” I wanted to spend it as soon as I got it! Teens are bombarded with so many opportunities to spend money so parents need to help them understand how to be a careful shopper. Teach how to comparison shop for the best price and look for product reviews. Explain how to read the fine print on sales and store discounts, and help them understand return and refund options after a purchase. Most importantly, help them identify a whether a purchase is a need or a want.


  1. Teach your teen to show generosity to others in need. If your family is charitable help your child get that same sense of giving and community by identifying a cause or charity that they find important. Help your teen understand that even a small financial donation will be meaningful to them and to someone in need.


  1. Give your teen the ability to manage their own money. Setting up a bank account and letting them manage their money will teach financial responsibility. Of course they still may make financial mistakes, everyone does, but wouldn’t it be better to do so under the watchful eye of parents while still living at home? Teens must learn money skills like watching their bank balance, tracking spending, reconciling transactions, and not over-drafting an account. If they incur a fee, let them feel the pain of watching their balance decline. Hopefully they will learn the first time it happens.


  1. As a father says to his son in the play Hamlet, “Neither a borrower nor a lender be.” Teach teens the perils of borrowing or lending money to friends as this is a scenario that rarely ends well for the friendship. Even adults struggle with this, but explaining this to your teen before the situation arises will help them avoid uncomfortable situations with their peers.


  1. Most teens do not have access to credit so they do not understand how it works. They only see their parent’s use of credit and rarely are around when the bill comes. To compound the problem as soon as they reach 18 many teens are offered credit cards by credit companies. Before this happens parents must be proactive and explain the responsibility of using credit and credit cards. Teens need to understand that credit cards do not equal free money. In fact it can be the most expensive way to pay for something if not managed correctly. Paying with credit is buying with a promise to pay later, and later always comes. Teach how interest works and how costly the purchase will be if not paid off quickly.


  1. Most importantly, model best money practices for your teen! If parents have poor money habits they will unwittingly pass them onto their children. Teens watch what parents do and use that as a standard for their own behavior. A frank conversation with your teen about money mistakes or struggles will help them understand that money is confusing and mistakes can be costly. It is up to parents to teach money management because unfortunately, for most schools it is not part of the curriculum. We must prepare the next generation and be proactive to minimize future financial struggles. Do not assume your teen understands how to manage money. Instead keep an open an ongoing conversation to instill good financial habits as they enter the world of adulthood.


Asalyn Coachman is a Registered Representative of and offers Securities through The O.N. Equity Sales Company, Member FINRA/SIPC, 39395 W Twelve Mile Road, Ste. 102 Farmington Hills, MI 48331 (248) 482-3600. Investment Advisory Services offered through O.N. Investment Management Company. Financial Architects, Inc. is not affiliated with The O.N. Equity Sales Company or O.N. Investment Management Company.

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