Being a teenager these days is much different than being a teenager when I was growing up. The youngsters today have a lot of opportunities and information is readily available to them.
Teenage years can be an exciting time in our children’s lives. They are learning how to drive, starting to get a level of independence, forming opinions and exploring career choices all in anticipation for college and work life ahead. Sometimes I wonder though, what about financial education and readiness among teens and why is this not a mandatory subject at least at the high school level. Is it because as a society talking about money is a taboo topic? Or is it because parents believe that imparting this education is the responsibility of the school and vice versa? Or could it be because parents feel like this is not relevant especially at the middle or high school level?
Whatever the reason I certainly believe that we need to educate and empower the next generation and start them young. The key to managing finances well like everything else in life boils down to personal habits. We need to develop good practices and repeat them consistently to get a good result. There are no shortcuts or magic formula.
Thankfully there are timeless tools and methods available that once applied can lead to success. We need to expose our children to these concepts sooner rather than later. So if you are raising a teenager, it is a good idea to give them an allowance for the week and teach them about having a budget so that they can apportion money among various buckets and see how long will their money last or teach them about prioritizations etc.
With a highly visual world that they are living in these days, and the ease with which they can shop online. It is scary what the future would be if our teenagers did not know the fundamental difference between needs, wants, and desires. It is easy to get swayed at this age as they have to deal with “peer pressure.” We need to be their guide more than ever and teach them about delaying gratification. To give you an example, credit card usage was not prevalent when I was growing up (in India), and we would carry cash around, I know it sounds so primitive. But this inconvenience and constraint, in hindsight, actually helped me to be more careful about the choices and removed the impulse to buy everything instantaneously.
If they go to a mall or hang out with a friend, ask them to write down how much they spend and on what? Then ask them to check if they have the right balance left. If they loan/borrow money from a friend ask them to settle it. There is no shame in asking a friend if they owe you something. Following these rules will make them accountable and responsible.
If your kid does summer job or other gigs to earn some pocket change or gets birthday cash from grandma, open a savings account and have them invest it. Introduce them to the concept of interest or dividends and show them how money grows, like we did this summer. Our firm organized a workshop for high school students in the local community to teach them simple basics of investing and finance. We played the Stock Market Game. The participants got virtual money and could trade stocks, mutual funds, ETFs, build an asset allocation to diversify in a live simulation. The game even charged them transaction fees, and paid interest on cash balances and came very close to giving them a feel for real-life portfolio management. We further highlighted essential personal finance topics like budgeting, building a credit score, being responsible with credit cards and introduced them to how debt works. The session was meant to give them exposure to managing their money and showing them how things tie in together. To my delight, a lot of young women participated, and I was thrilled to see their enthusiasm for investing.
Lastly, don’t ignore the most obvious, kids will learn by seeing and observing you, as I witnessed with my daughter when she price checked at a store and got them to match the online offer, she ended up saving $12 in process. Remember it starts small, so applaud them for being so money wise. Whatever you appreciate about them will grow.
All these seemingly simple tips should help lay a good money foundation and awareness in your teen. If you are interested in exploring more, please check with your local middle/high school as some offer investing clubs or be on the lookout for workshops offered by wealth management firms promoting financial literacy. This movement is certainly gaining some steam, and I am excited to be a part of this changing landscape to empower the future generations.
If you happen to be in our area, please reach out to me at email@example.com to be put in an interest list for the upcoming financial literacy workshop for teens. We will email dates once announced.