Okay so full disclosure – my kids are 10, 9, and 7 years old so obviously I don’t have any teens yet. However, I’ve been a financial coach for six years, and teaching teens how to manage money has actually been one of my favorite things ever! Why? Teens aren’t as rigid and stuck in bad financial habits. They are way more willing to learn than many adults. So if you came here looking for ideas on money skills your teen needs to have I promise they’re more willing to learn than you may realize!
1. How to open up a checking and savings account.
I know. It seems so basic and maybe your child already has one of these accounts that you opened for them. It’s important though that they learn how to do this on their own. Allow them to research different banking options. What’s the minimum opening deposit? What are the fees? How is the customer service? Any special benefits they offer?
2. How to set up and work a budget.
Noticed how I didn’t say, “stick to a budget”? Sticking to a budget is hard but working with a budget is much simpler. If you’ve read my book, Getting Good with Money you know that I’m a fan of what I call, The Quick Start Budget. Basically, you only budget what you actually have – not what you plan to have. Have your teen learn how to budge and manage the money that they have in their checking accounts regardless of what their paycheck amount is (which is likely to vary anyway). And challenge your teen to set savings goals in place as well – first car, new clothes, latest iPhone, etc.
3. How to use mobile banking apps and how to write a check.
I know that seems strange because a lot of folks don’t write checks anymore. However, I still believe in the importance of understanding how to write a check. Heck, I write a check every week to tithe at my church! So checks are still used today even if they aren’t used as often. You also need to make sure your teen knows how to use the banking apps associated with the bank they opened their accounts at. They also need to know how to use apps like Venmo as they will likely encounter this more often than not in their adult life.
4. How to protect themselves from identity theft and fraud.
Teach your teens how to identify a potential fraud/scam. Explain that they shouldn’t click on links and log in without looking first at the URL and the email address that sent the email. They should never send money to people they don’t know nor give out their personal information via online or over the phone (or through text message). Encourage them to set up double authentication on all their accounts to help further prevent someone from being able to hack into the accounts. Also, explain to your teen what they should do if their wallet/purse is ever stolen or if they lose their debit card.
5. What credit cards are and what debt is.
If you’ve followed my blog for any length of time you know that my family is 100% debt-free including the house. We struggled big-time with debt! Partly because the only advice I or my husband received as teens and young adults was “you need to get a credit card so you can build credit”. Well, no one told us about paying it off in full every month. Nor did anyone explain why taking on a personal loan was dumb. Teach your teen what credit cards are. Explain the dangers of them and how best to use them if they decide they want one. Educate your teen on debt – there’s no “good” or “bad” debt – it’s all just money you owe someone else. Help them understand that basic principle. In fact, have them read The Richest Man in Babylon. It’s a quick read that will hopefully inspire them to avoid sinking into debt.
6. How to read their paycheck stub
I honestly wish someone had taught me at 16 years old when I was working at American Adventures down in Marietta, GA how to read my paycheck stub! It wasn’t until I became a working professional that I finally understood how to read that gosh-darn thing! This is important because as your teen gets older and their family grows they may need to change their withholding status with the IRS. They need to understand what that will look like on that paycheck stub along with what it means to have benefits and retirement packages taken out. This will help them better understand how to negotiate a pay raise or salary when they’re adults working in the professional world.
And fun fact: mom and dad you can set your kids up with a Custodial Roth IRA once they start working! So you can teach them how to invest and save for their retirement before they even leave the house!
7. How to do taxes.
Likely your teen isn’t going to have to do their own taxes for a while since they can still be claimed as a dependent on your taxes. However, they still need to have a basic understanding. You should walk them through filling out the tax organizer via tax software like Turbo Tax. Explain how to read their W-2 and how to complete the W-4. Also, explain to them what it means and looks like to be a 1099 contractor. Help them understand the important parts of reading a 1040. Explain to them to types of receipts they should keep for tax purposes and how best to organize those documents (you can read my full blog post here that goes into detail on how to organize your taxes).
8. How to plan and save for college.
College isn’t free. It doesn’t matter if you’re an amazing parent that’s paying for your child to go to college or if they earn a scholarship. It’s not free and your teen needs to understand that. Teach them how to compare the tuition costs and the various other costs associated with going to school (books; room and board; meal plan; parking pass, etc). They need to bring this into the conversation around which schools they want to apply for. If you, the parent are planning to pay for some of the expenses explain what expenses and how much. Seriously, don’t be vague. Shoot straight with your teen. This is a big decision and they should have all the variables in front of them when they decide.
9. How to save for and buy a car.
Teach your teen how to research cars and the things they need to look out for when buying a car. Show them how to compare insurance rates and calculate gas mileage to figure out the average cost of gas to fill up the tank. Have them research how much it costs to put new tires on the car. Explain the different maintenance aspects of owning a car and why you need to do them. Seriously, teach them why. I once had a co-worker whose car completely seized up and stopped running because she never changed the oil! She had the car for 5 years and never changed the oil because she didn’t think it was necessary! Your teen needs to understand the why behind maintaining their vehicle.
Once they understand the different aspects of maintaining and owning a vehicle then have them come up with a dollar amount they plan to save to buy the car. Doing the leg work first will help them have a better understanding of the true cost of ownership beyond just wanting a specific make and model car.
10. How to save for future goals.
We all know that saving money is important but believe it or not many people fail at doing it. Why? Well, what happens if you don’t pay your water bill? Your water gets cut off. What happens if you don’t pay yourself by way of sticking money into a savings account? No one comes to take the money from you. No one shows up demanding payment. So it’s easy to push saving money to the wayside. We don’t want this to happen to our kids so let’s teach them how to save for future goals like:
- A car.
- Vacation (or senior trip).
- Saving for college expenses.
- Raising capital to start a business.
- Saving for retirement.
It’s important too to talk about saving for things like a down payment on a home and paying for a wedding and even raising kids as well. Why? Because these are possible – notice I said possible – life events that your child may experience. It’s important to talk about them and how to prepare and save for them. There are so many couples that start their new life off in thousands of dollars in debt for a wedding. Let’s not let that happen to our kiddos.
Alright, mamas and papas! If you’ve raised a teen what is one thing you’d add to the list above?
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