By Kristen Ruhl – Vice President of Programs
We’re making strides as a nation when it comes to requiring students to take a course in personal finance to graduate high school, but we’re still falling short. According to the Council for Economic Education, currently 23 states require a personal finance course to graduate. Progress is being made but we can’t just sit and wait for it. That’s where you come in. One of the best things you can do for your teen is to help them build financial decision-making knowledge and skills as they grow into young adults. According to a 2022 Greenlight Researchscape Survey, 93% of teens believe they need financial knowledge and skills to achieve their life goals and 97% of parents agree. Teaching financial literacy doesn’t have to be complicated and you don’t need to be a financial expert to do so. Here are five ways to teach your teen money management so they can be financially healthy adults.
1. Help with a source of income
If you are able, provide your teen an allowance for completing chores or, if an allowance isn’t feasible, help them find work outside the home. Having actual money to manage gives them a sense of responsibility and takes personal finance from an intimidating concept to a tangible reality. Having personal income provides teens with the opportunity to practice skills like expense tracking, budgeting, and saving, learn from their mistakes, and build healthy financial habits before they need to manage their finances independently as adults.
2. Open a bank account
Now that your teen has income, they need a place to put it. Opening a bank account is not only important for saving purposes, but it can also give your teen a sense of accomplishment when they see, what you hope will be, an increasing balance. Having a bank account is the first step in learning basic financial skills like making deposits, monitoring transactions, and using a debit card. Bring your teen with you to open the account and encourage them to take the lead, talk with the banker and ask questions. Make sure they know that the staff at financial institutions welcome questions from customers and are there to help them learn how to manage their accounts and their money.
3. Talk about money with them
According to a 2022 CNBC Momentive Poll, 83% of parents say that parents are responsible for teaching children finances, yet 31% say they “never” talk to their children about household finances. Money shouldn’t be a taboo subject. Include your teen in family budgeting conversations and let them see for themselves how your money is allocated. Talk with them about the decisions you make and how you set priorities. Ask them about their own goals and what motivates them financially. By including your teen in financial conversations, it can help them feel less intimidated and more in control.
4. Develop a budget and set goals
One of the topics to discuss when you talk money with your teen is developing a budget and setting goals. Creating a budget doesn’t have to be a daunting task, especially when you include budgeting for fun things like clothing, eating out with friends, or even their own car. If they have consistent income, help them set up an automatic transfer between their checking and savings accounts so they never have to think about it. A common budgeting technique is to use the 50/30/20 rule where 50% of their income is spent on needs, 30% is spent on wants and 20% on savings to reach their long-term goals. It’s important for them to have short-term goals as well as long-term goals so they can see how their commitment to saving pays off.
5. Track expenses
Once they’ve developed a budget and set their goals it’s important for them to track their expenses and see if they are sticking to their plans. It’s okay if they go off course occasionally, in fact, mistakes are good! Learning healthy financial habits involves making mistakes along the way and learning how to do things differently the next time around. Encourage your teen to keep receipts or review their account transactions, then help them categorize their purchases so they can see how they’re spending their money and determine if they need to cut back in any areas. Financial literacy is a marathon, not a sprint. As teens get older and develop into young adults their financial picture becomes increasingly complicated. Reviewing and tracking expenses is an important habit to get into at any age.
Empower your teen with financial education
If the thought of implementing this five-step plan is overwhelming, we’ve got your back. Through SecureFutures’ Money Sense resources and Money Path app we can help you empower your teen with financial education. Money Sense introduces teens to financial basics like banking, creating a savings plan, managing a budget, and maintaining healthy credit. Our Money Sense on Demand online learning modules are an excellent educational resource that you can use with your teen.
Money Path, a personalized, technology-based experience unlike any other, helps you and your teen explore and compare different college and career paths, calculate education costs, and learn to budget and save for long-term goals. One of the best parts is that they can revisit and adapt their paths throughout their high school years and beyond because they’ll have unlimited access to the Money Path app.
“Money Path is a unique and real-life tool that helps all students make confident decisions about their academic, career, and financial futures – wherever their path leads them after high school.” – Duy Nguyen, Assistant Wisconsin State Superintendent, Wisconsin Department of Public Instruction
What it comes down to is keeping your financial advice concrete and connected to your teen’s life right now, giving them practice, welcoming mistakes, and meeting them where they are. By talking with your teen and figuring out what their priorities, motivations, and interests are when it comes to money, you can be an active part of their personal finance journey.