How To Teach Your Teens Financial Responsibility

We are approaching high school graduation this month and college after that.  This year we have opened up my son’s first adult bank account with a debit card attached along with online banking.

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He has grown up hearing the word budget and has a full understanding of what that means.  He knows what teen financial responsibility is all about!

I was reading an article on CNBC regarding credit card debt and college students.  It stated that over one-third of college students had credit card debt and many weren’t even paying them.

I remembered this all too well 25 years ago.  It was so easy to get a credit card while I was in college (and NO JOB, by the way) and I was asking myself where is the education of our teens and whois teaching then financial responsibility?

Through some research, I have come up with a fantastic list of ways to help your teen understand money and to teach your teen financial responsibility.


Understanding The Concept Of Money

What is Debt?

Teach your teenager exactly what debt is.  There are more lousy debt choices than good. The only good debt is a house.  Even then, if you can plan your life well, you won’t also need a loan for that.

Discuss the definition of debt itself and decide at this point they will not become a slave to the world of owing anyone for the purchases they feel they need at the moment.

Model Good Financial Behavior

Ah, the adage “Do as I say, not as I do.”  This should not be the way you teach your teenager to deal with money.

Making sure they SEE you paying bills, not using a credit card, and stuffing your envelopes each paycheck is what they will understand and remember.

Telling them not to use credit cards and then whipping out that Discover Card to pay for things you want will be the lessons they remember.

Having A Healthy Relationship With Money

Teach your teenager to understand that the amount of money is infinite.  Not when it comes to purchasing material things but based on how much you can make and have.

The beliefs that so many have heard in their lives aren’t always accurate.  “Money doesn’t grow on trees” Do you think I am made of money?”

“We will never be rich.”  “The 1% are taking everything away from the average American.” ” We work so hard all our lives, and the rich get all the benefits!”

I chose to teach my son that the sky is the limit when it comes to how much money you want to make.

You d the right things, live an empathetic and compassionate life, and make as much money as you want to do what you love.  Everyone has greatness in you, and money is not pie.

It is practically infinite.

It is ok to love money.  It should not come before everything else, but it is an excellent concept to talk about and should not be a taboo subject.

The sky is the limit.  You can be anything that you want — all true.


Teach Your Child The Value Of Personal Finance

There needs to be an understanding of the value of money.  If it costs him $40 for that XBOX game, and he makes $10 an hour at his job scooping ice cream, it will cost him five hours of work.

These students need to understand how quickly money can slip through your fingers and how long you need to work in order to buy the items you want.  The value of money can go a long way in understanding what financial responsibility is all about.

Teach Your Teen To Budget

The word budget is thrown around every single day in our home.  Everyone understands what it is and what it means when I say it isn’t in the budget.

Our teen has seen me creating the budget and paying the bills.  He understands what the budget binder looks like and its purpose.

As he has started to make a little more money this summer and will have a bit more money than he is used to after graduation, we will sit down together and create a budget together.

Don’t pay teens for good grades

That is their responsibility as a student.  They should be taught that the reward comes from doing your best and taking pride in their hard work. It is not an excuse to get paid.

Don’t pay teens for everyday chores

Keeping their room clean, doing the dishes, and taking out the garbage are responsibilities that we have decided to give our sone.  He has never gotten paid for them.

If there are other things that he does above and beyond those chores and the tasks that go into being a functioning contributor to our family, he might get paid for that.  But not for everyday things that we all need to do.


Teens, Home, And Money Management

Teenagers need to know the realities of running a home.  When they start to think about whether they are ready to be out on their own, Teens need to do the math.

How much does it actually cost to have your place?  This isn’t just the price of rent. It is electricity and heat, cable and internet, phone, groceries, and other personal expenses like insurance, cell phone, and gas.

Other costs like food and fun must be taken into consideration also.  Do you make enough money to cover all these and still have enough for savings and emergency funds?

Open A Bank Account With Your Teenager

Decide on whether a debit card should be attached to that account or if it is a cash-only system. And make sure they understand how to keep track of the money that is in there.

Online banking is the ideal way to set this up.  That way, they always have access to knowledge.

Teach teens how to read a bank statement and write a check

Learning how to read a bank statement is crucial to making sure that their accounts have not been hacked or their money messed with.

Go old school and show your teen how to balance a checkbook.  Most banking is done online but keeping track of where you spend, how much you spend, and how much you have available are still valuable skills and needed to avoid costly mistakes.

Learning to write a check, signing the back of a check, and filling out a deposit slip are all incredibly valuable skills that go hand in hand with teens managing financial responsibility.

These life skills are invaluable.

Also, teach your teens how to read a pay stub.  Show them where each of their deductions is listed and let them know where that money is going.

save money printables

Discuss The Dangers Of Credit Card Debt.

I want to stress this point.  Credit cards are not dangerous for everyone.  But when you are first learning to have a fantastic relationship with money, credit cards will just get in the way of that.

Teach your teen that just running out and getting a credit card to shop willy nilly is a terrible idea.  The interest rates are too much, and they charge for accidentally missing just one payment are astronomical.

It is the BEST way to ruin the credit of a young person.

Warn them that as soon as they graduate, those credit card applications will come pouring in.  You will be asked outside of every department store as well as while you are cashing out of all the others.

They will try to entice you by saying things like “Apply now and save 10%!!!” Or they will be outside the bookstore on your college campuses offering you a free State University T-Shirt!!

Show them the numbers.  If you buy a $50 hoodie and you don’t pay it off, nor do you remember to pay it when it is due, they will charge you 28% interest.

That hoodie will cost you $64 instead of $50.  Add the $35 late fee, and you are looking at almost $100!!!

If you can’t afford it, save until you can.

Only Buy What You Love

Have a conversation about retail therapy and the purchase thought process.

Explain to your teen that going out to blow money to make yourself feel better after a tough day is a terrible idea.  TEach coping skills other than retail therapy.

Also, educate those teenagers on the purchase thought process.  When you are thinking about something you want, write it down.  When you have saved your money, revisit your list and decide if you still really want it.

Discuss what should happen when you are out and discover the COOLEST pair of boots but they are $200.

Take that love and let it sit.  Then if they love them still, try finding them cheaper someplace else.

If you don’t love it, skip it.

Gratitude, Contentment, and Priorities.

Gratitude can go a long way, and it should be taught to our children very early in life.  When you are grateful for what you do have, you are less likely to be envious of what others have.

Teens who learn this skill can delay instant gratification and be patient when they find something they do want to buy.  They need the lessons of being content with what they do have and loving where they are.

Priorities of a teen can be confusing.  Are they just wanting that new car so they can look cool to their friends, so they are willing to take out that loan?

Can they carry on with the hand me down from their parents and use that money to invest.

You are not caring what others think about you because you have more significant goals like starting your own business after college is very impressive.

Convince them to keep their eye on the prize.


The Hidden Dangers Of Student Loans

Although by the time your teen gets to graduation time, this conversation is a bit overdue.  We have been having the student loan conversation since my son knew what college was.

Because I went to college on a full student loan ride (over $25,000 in 1995) and it took me 25 years to pay it off, I swore I would never allow my child to start their adult life in debt.  If they wanted to go to college, they needed to find a way without debt.

How To Avoid Borrowing Money

According to the government site Student Debt Relief, here are some great ways to avoid taking out loans for college (taken from their website).

  • Save your money as early as possible. By saving your cash before and during college, you can help to repay those loans much more quickly once they become due. Get a part-time job, have a yard sale, or begin a savings account so that you will have extra money to pay off the loans and payments that will quickly accumulate.
  • Take your time, and don’t be in a hurry. While everyone wants to graduate and get a new career as soon as possible, it is essential to keep in mind that the longer you’re enrolled, the longer you can put off repaying those loans. Try out part-time school, and work part-time if you can. While this method won’t work for everyone, it can help ease the stress of being a full-time student while allowing you to earn money and get a jump-start on paying back your loans.
  • Get as many scholarships as you can. The difference between loans and scholarships is that you won’t have to pay those scholarships back. There are hundreds of different types available, so look into these as soon as possible. The more you are awarded, the less money you’ll have to dish out to student loans. Even if you earn a couple of smaller scholarships, every little bit helps to whittle down that student loan balance.
  • Become an intern. A lot of internships are unpaid, but there are also many that do pay. It might not earn you as much as a full-time career, but you will be able to simultaneously earn a paycheck and gain the necessary experience along the way. Do your homework, and try to find an internship with a local company that offers positions for college students.
  • Get granted a grant. Similar to scholarships, grants do not have to be paid off and can go towards your college education. The government offers several different types, but be sure to pay close attention to the guidelines before applying. Grants are typically given to people who have specific financial difficulties, while scholarships are given to people who have different abilities in things like sports, the arts, writing, or other facets. Your financial aid counselor can walk you through the grant application process, and see if you qualify.
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A Few More Ideas On Student Loans

  • Consider a less expensive school.
  • Live at home.
  • Get a job.
  • Buy used books.
  • Live a frugal life.

It is not always easy to talk about money, but it’s quite a necessity to speak with your teen about money.  The conversations you have will form their thoughts, ethics, and opinions about money that they will carry for the rest of their lives.

Model good money behaviors and admit to the mistakes you have made with money so that your teens can learn financial responsibility!

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