- Money knowledge is one of the top issues many teens struggle with.
- Parents can teach children to save money by turning errands into money lessons, keeping the lessons as simple as possible and by practicing what they preach.
- Some other methods of helping teens to learn money management are helping them open a bank account, being open and honest about your income and expenses, and encouraging them to pay small monthly expenses.
Even though teens may think they know it all, research has found that money matters are one area where teens are most assuredly lacking knowledge. Proof of that fact comes from the 17% of teens between the ages of 12 and 17 who said they knew how to manage their money, and the 24% of teen respondents said they did not know the difference between debit and credit cards.
Among teens for whom budgeting was a concern, learning how to save and how to budget were their biggest priorities. However, part of the reason for the lack of teen knowledge of money matters comes because their parents are not doing a good job teaching them about money.
More parents were willing to talk about drugs and alcohol than they were about money. More than 10% of teens said that no one at home helps then manage their money. That number grows to 15% among older teens between the age of 15 and 17.
"A parent's role in setting a financial example for their children is critical," said Jim Kelly, head of direct bank, ING Direct Bank, which sponsored the survey along with Capital One. "Yet many parents feel unprepared to set an example."
Despite that lack of guidance, teens are getting jobs to start learning about money on their own. Half of teen girls had jobs for outside income while 38% of boys held jobs. Overall, 30% of both teen boys and girls received money from performing household chores, which the survey said can prove to be a valuable financial lesson for teens. According to Capital One and ING Direct, parents can also teach their children about saving by following these steps.
Tips on teaching teenagers about money
Turn errands into money lessons: "Couponing is all the rage right now, so use the weekly trip to the grocery store as a practical way of explaining spending and saving. Make a game out of finding the most affordable cereal or competing for bigger savings at the register than the last trip to the store," the study said.
Keep it simple: "Don't overcomplicate the conversation with technical jargon or turn it into an economics lecture," the study said. "Talk about saving for rainy day items such as a trip to the movies or a new video game – make it relevant and it will resonate even more."
Practice what you preach: "Whether you're a savings savant or cash-strapped mom or dad, have candid talks about your financial successes and missteps," the study said. "Make it a priority as a family to be more mindful of spending less than what is earned and celebrate how money is grown over time."
Be open about income and expenses: According to Military One, one of the top methods of teaching money management to teens is being open and honest about your monthly income and expenses. Given that many parents tend to hide the details concerning how much they are making and how much they spend on the monthly bills, this leaves plenty of room for confusion. By taking the time to discuss these things openly and honestly about these things, your teens will be better prepared to manage their finances in the future.
Opening a joint bank account: By either opening a joint bank account or helping them to open a bank account, this is yet another lesson in money management. By allowing or encouraging them to create a bank account, this will allow them to better understand the value of a dollar as well as develop better spending habits.
Start with small monthly expenses: Although many teens do not have a sizable income, many of them earn enough to be able to take on smaller monthly expenses. For instance, you can have them pay for a monthly Netflix fee, a music streaming service, or even an internet bill. Either way, the point is to make the fee something small enough for them to handle but significant enough that they need to budget to have the money each month.
Teach about the pros and cons of credit cards: Credit cards can offer major benefits to those who are mature enough to handle them, they can be quite detrimental to those who are not mentally prepared to handle them. Therefore, teaching teens the pros and cons of credit cards can help your teen understand this before they start applying for them.
- Discuss how smart purchases and investments: Given that teens are often not accustomed to having a sizable income, they often mismanage money once they join the working world. Therefore, you should be taking the time to discuss with them the difference between smart purchases and wasting money. On the flip side, you also need to discuss the differences between making investments and simply wasting money. For instance, while purchasing a car is one of the first investments many people make, as we all know, most cars are not investments and rather, they simply become just another bill. On the other hand, by encouraging them to look into buying property, investing in the stock market, and other potential investments, you will be giving them a better chance to create a financially secure future.