Financial Education for Teenagers

It is never too early to start practicing good money habits–in fact, the earlier teenagers are exposed to financial education, the better the chance they will become financially savvy. This is an important life lesson in general, but especially if college is on the horizon for your teenager. Becoming a college student is probably one of the most exciting and immediate milestones for high school students; teenagers feel a sense of freedom, and it’s often the first time they are independent financially. Use these money lessons for teens to give your child the financial literacy skills they need. If you’re not sure where to start the conversation with your teen, try some or all of these ideas.

1. Teach them about debt. This is an essential part of financial education–high school students, regardless of their post-12th grade plans, should know about the cost of going to college and the consequences of debt. Even if parents plan to pay for the child’s entire college education, things can change. Some parents make the mistake of putting education first, but not talking about the work it took to build-up the college fund. Again, teaching and exampling discipline and focusing on a long-term goal is key to success.

Let teenagers make monetary mistakes, and show them how every action has consequences. If the teen goes over budget one month, they need to learn that in the next month, they will have to cut back on a category, such as going out for ice cream. Showing them the burden of debt will be one of the greatest lessons that every parent can teach their children, regardless of the parent’s income. While it is much easier to simply hand out cash and cover all of your child’s “expenses”, having them put some skin in the game and figure out debt management can be invaluable.

2. Work on a budget. Teenagers, especially high school students, want to have fun and enjoy their time to the fullest. This does not, though, always come with the responsibility of paying the greatest attention to their spending. It can be even harder when teenagers don’t know how their parents are managing their finances—good practices and discipline are the best example you can provide your children.

Budgeting can’t be mastered overnight, which is why it must be taught through financial education. Ask them to be involved in your weekly household goods shopping and in creating monthly budgets. If they’re working a part-time job, assist them in creating a budget plan and saving for college or other saving goals such as their own car. Children crave discipline and boundaries—and financial discipline is so very important. Budgets help teach them that fun is possible, but that it has limits and comes after their responsibilities have been met.

3. Make small savings goals. Take baby steps toward building a savings account for their own goals, but be stern in the importance of saving. If you provide an allowance, mandate that the first 10% go directly to savings before any other spending occurs. Once this habit of saving takes hold, it will become second nature as they move through life. It is also important that with these savings, they have the ability to work toward a goal. Saving just to save is important, but it is equally important to save for something important. Ask your child what they want to have the most and help them define their goals. It could be a new iPad, a pair of new kicks, or a trip with their friends. These small goals will help motivate them to save money instead of spending impulsively.

Once they are motivated to save, open a savings account to which they can contribute consistently. Perhaps even offer to match their contributions up to a certain amount each month. At the end of each month, show them the monthly bank statement. Seeing their progress will push them to put more toward their goal each week. Once the first savings goal is accomplished, your teen can start moving to bigger, more valuable goals.

4. Instill good credit habits. Educate your child on what their credit score means and the financial consequences if can bring. One important consequence to relay to your teenager is how a credit score can affect their future finances. One avenue to help your teen have a good credit score before going to college is giving them access to a credit card; of course, before giving them a credit card be sure they have shown and demonstrated good money habits. It’s easy to overspend with a credit card, which is a financial education lesson young adults often have to learn in college when credit card companies are offering cards left and right.

Walk them through the fees and benefits of different cards, and best practices regarding credit card usage, so they can work towards the perfect credit score. Many graduates find themselves with little to no credit when it’s time to buy a car, get a loan or even rent an apartment if they haven’t started working on building their credit score throughout college. Prepare your child ahead of time, and they will thank you for it.

Allison Green
Boston Tutoring Services