How to talk to teenagers about money
If you have a teenager in the house you will have, in a perfect world, been able to expose them to good money habits as they’ve been growing up, but how do you make the lessons stick as you prepare to launch them into the world?
Demonstrate good money habits and attitudes
Like it or not, your teenagers will tend to pick up on your own attitudes and behaviour around money, so think about the messages you’re sending out.
If you’re the type of person who saves up for treats your family wants, like holidays, it’s important to share what you’re doing with your teens. Explain to them that you have set up an automatic payment to your savings account to make saving easy, and share with them the family budget that enables this to happen.
You could also share the lesson of saving into an emergency fund, so that you don’t have to rely on credit when something unexpected happens, like your car breaking down.
When a bill comes in, it’s good to explain that you don’t have to worry about paying it on time because you’ve set up a direct debit that takes care of it. That can lead to conversations about the importance of maintaining a good credit history and credit score, and how that can open doors when it comes time to get things like a cellphone account, a credit card, a mortgage, a personal loan or even rental accommodation!
Be careful how you talk about money too. If you’re always complaining about not having enough money, or making statements like “I’m hopeless with money” or “don’t worry, I’ll just put it on the credit card”, your teens will probably develop similar attitudes.
Give them financial responsibility, and let them make mistakes
Nothing teaches financial responsibility faster than giving a teenager control over a budget. For example, you could allocate them a budget to spend on clothes for the year.
This is a great way to teach a teenager the real cost of a designer sweatshirt, and the value of ‘trade-offs’. One trade-off might be forgoing the designer sweatshirt in favour of a whole outfit from another store. Or they might decide they really want the designer sweatshirt - in which case they will need to live with the fact that they can’t afford as many other clothes.
You could also give them control over the budget for the supermarket shopping one week, and perhaps a reward for sticking to the budget and coming home with a satisfactory week’s worth of food.
A supermarket is a rich source of potential trade-offs to learn from. You may discover that with your teen at the helm, there’s no such thing as not being able to afford ice cream! And if they’ve made a sensible trade-off to achieve this, it’s a perfectly valid decision.
In both these cases, it’s really important that you don’t bail them out when they blow their budget. Let them experience the consequences of their actions, whether it be a meagre winter wardrobe or having to put some groceries back on the shelf.
Help them manage their first wages
The teenage years are often the time young people get their first experience of earning a regular wage, whether from an after school job or a stint of work in the holidays.
When their first paycheck comes in, this is a perfect opportunity for you to help educate them about money. You could sit down with them and help them understand how tax is deducted from the amount they earn.
This is also a great time to encourage them to set a savings goal. Let it be something that motivates them - for example, a first car. Then you can show them how to set up an automatic payment to their savings account to go out just after they are paid. This way you are teaching them that a savings habit can be automatic and easy - something you don’t even have to think about.
Also remember that a regular paycheck can be a little overwhelming and don’t be dismayed if your teen blows the whole of their first paycheck on something frivolous. You have to stand back and let them learn that when it’s gone, it’s gone. This is a valuable lesson about money, and it has all the more impact if it’s their own hard-earned money that disappears.
Teach them where to go to find out more.
If you feel like you have gaps in your own financial knowledge to teach your teens well, there are plenty of other resources out there to help. There are several personal finance podcasts out there that can help with hot tips and advice, as well as lots of not-for-profit personal finance advisors who can help set your teen on the road to a lifetime of financial health.
MoneySmart is a good place to start but there are also an increasing number of great products in the market specifically aimed at helping young Australians be good with money. Have a look at Spriggy, a great app designed to help both parents and kids of all ages manage digital pocket money.
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