Have you had “the talk” with your teenager, yet? Not the one about the birds and the bees, but the other important talk? Money can be an unsavory topic for some—in fact, one-third of people feel uncomfortable discussing finances with family, and one-fourth of parents say they are happy to wait until their age or health becomes an issue before having financial conversations. Engaging with our kids early and often about finances is one of the best ways to ensure they remain on track for their own financial future, though, especially when they are about to leave the nest for the first time and head off to college. Luckily, the process doesn’t have to be painful. Here are some easy tips for helping your teen understand the importance of money management.
1. Ask Your Children Questions About Money
If you’ve never discussed money with your teenager before, consider getting the ball rolling by opening up the floor to their own ideas about finances. Depending on how much they’ve paid attention at home, they could have some pretty specific ideas about spending and saving, making a living and creating a solid financial footing. If they’ll be heading off to college soon, you could start by asking, “How do you think money will factor into your life away from home?”
2. Discuss Your Own Money—Including Your Mistakes
It can be difficult to open up about our own financial specifics—especially when that involves mistakes—but sharing your own experiences with money is one of the best ways for your child to see firsthand what might work for them, as well as what they might want to shy away from. Explain to them how a credit card works, and how debt accrues, as well as how you’ve budgeted throughout your life, including how you’ve been able to save for additional goals, like retirement, travel and, yes, sending your child to college.
3. Open a Savings Account for Them
Opening a savings account can be done in a short amount of time and, often, right from the convenience of your own home. If you haven’t done so already, include your kid in the process and talk about the importance of always saving even a little bit in a separate account for emergencies.
4. Broaden Your Child's Horizons
A broad overview of finances will include more than just the basics. Be sure to talk about some of the additional things that adults need to consider when it comes to their money, like paying taxes, saving for retirement, investing, etc.
5. Go to the Bank Together
Opening a savings account is important, but you’ll also want your child to understand how a checking account works. If your kid will be heading off to college, do some research to find out which banks have branches closest to their campus, then go in with them to open an account. Discuss how checks work and make sure they’re aware of any fees associated with the account, including which ATMs they can use to withdraw cash.
6. Consider a Secured Credit Card (Or a Joint One)
Credit cards can be a tempting offer for a teenager away from home for the first time—access to free cash! Rather than having your child open a card without your knowledge, pre-empt that from happening by opening a secured credit card with a set amount of money on it with them, or consider adding them as a user to your own card. If you decide to go with the latter, make sure they understand that it should be used for emergencies only.
7. Be Open About College Costs
If your child will be heading off to school soon and you’re discussing money, it’s hard to ignore the elephant in the room—college costs. If paying for your child to go to school has been part of your overall financial planning, be honest about how you managed to work that into your budget. It’s also important to cover some of the additional items that come with a life away from home—books for school, for example, and entertainment or transportation costs—and who will be responsible for them.
8. Walk Them Through a Preliminary Budget
While you’re talking about college costs, it’s a good time to also start thinking about spending at school. Although your child won’t know exactly what they’ll be spending while they’re away at school, you can help them make some educated guesses and come up with an approximate monthly budget for them to try to follow. This is also an easy way to discuss whether or not your child will need a job while they’re at school, as well as what you’ll be willing to cover, and how much.
9. Let Them Know You’re There
Hopefully, be being open and honest about money—and by having these conversations in the first place—your child will start to understand that money doesn’t need to be a taboo topic. However, it never hurts to plainly state that if your child is ever in financial trouble, they can always come to you for help. Stress the importance of dealing with a financial issue as quickly as possible, to hopefully stop it from escalating, and let them know that you’re always there to help.
10. Lead By Example
Even if you haven’t been all that financially savvy in your past, now that you’re in the process of showing your own child how to properly juggle a budget, spending, saving, etc., it’s the perfect time to get your own financial ducks in a row, as well. Even if you do have credit card debt, don’t be afraid to share that with your kid, as long as you also share your plan for paying it off.
At the end of the day, we all want what’s best for our kids, and a financially healthy future is part of that. Whether money has always been a nerve-wracking topic for you or not, you might be surprised—once you start talking about finances, the easier it becomes.