In an age of credit cards, payment apps, and one-click purchasing, teens have little exposure to real money. But knowing how to budget, the difference between bad debt and good debt, and the power of saving can help teens succeed when they leave home for college or a job.
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We spoke with Julie Meissner, CRCP, founding partner of Treehouse Wealth Advisors, to get her advice on talking to teens about all things money so they can become financially wise adults.
Talk frequently
Unfortunately, in many families, talking about money can be seen as awkward or inappropriate. According to Meissner, the topic of money should never be taboo.
“Talking about money regularly can help your teen become more comfortable with it,” she said. “If your teen wants a new prom dress, it opens up a conversation about the cost per dress and alternatives like Rent the Runway. A decision about your teen's car choice could include discussions about long-term maintenance, replacement parts and whether premium or regular fuel is cheaper.”
Talking about responsible spending can make the conversation less awkward and help teens build financial skills.
Empower them
Allowing your teen to be involved in decision-making regarding expenses that involve them is one of the most powerful weapons a parent has in their arsenal.
“Exploring options with your kids is helpful, but holding them responsible for their spending is even better,” says Meissner. “By involving your kids and letting them take responsibility for certain aspects of their financial lives, you can help them learn how to become financially empowered.” That experience and confidence will be invaluable when your kids leave the house.
Provide resources
Adding other voices and opinions to the budget conversation is a good thing, especially if your teen doesn't want to listen to their parents. But don't worry, Meissner says, “There are lots of great books, websites, and articles available to help high school students learn about money. Providing these resources will ensure your teen has the information they need to make responsible financial decisions.”
Mesnier's list includes:
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I want more pizza Steve Burkholder
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I will teach you how to become rich Ramit Seth
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Early Investors Michael Ziesa
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Why didn't they teach us this in school? Carrie Siegel
Teaching the value of money
Most people would agree that earning money teaches valuable lessons. Meissner advised that, if possible, encouraging your teen to get a part-time job can be more valuable to them than the money they make. “It's also a good way for them to start saving, learn about taxes and respect income,” she said.
Explain budgeting
Budgeting is often a skill that needs to be taught: “By showing kids how to track their income and expenses and set aside money for savings and emergencies, parents can give their kids the tools they need to be better at managing their money,” Meissner says.
Luckily, there are plenty of powerful supports out there through apps like Mint, YNAB, etc. Let them explore each one and choose the one that best suits their needs.
Encourage savings
With Americans' personal savings rates near record lows, it's important to teach financial responsibility and the importance of saving for the future early on. Meissner says a good way to do this is to have your teen open a savings account and contribute to it at the same time.
“Make a schedule to track your child's financial progress and celebrate milestones,” she says. Your child will see real growth and will learn and be encouraged by their progress. This is also a good place to teach your child that compound interest can work for (or against) them.
Discussing good and bad debt
While debt isn't inevitable, if you're an American, you're likely to have some debt. But Meissner said not all debt is the same, and teaching your teens the difference is one of the most important life lessons parents can teach them.
“It's crucial that your child understands the difference between good and bad debt so they can make smart financial decisions in college and beyond,” Meissner says. “Good debt is borrowing to buy things that appreciate in value or generate income. Bad debt is borrowing to buy things that depreciate or don't generate income,” Meissner says.
For example, taking out a loan to buy a home or start a business might be considered good, responsible debt, she says, but paying for a vacation or a big wedding with a credit card is probably not a good idea.
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This article originally appeared on GOBankingRates.com: I'm a Financial Expert: How to Discuss Budgets When Your Teenage Kids Leave Home
