We teach our kids about important topics, such as nutrition, health, safety and how to behave in society. So why don’t we talk to them more about the financial skills they’ll need as adults? Parents often avoid discussing money with their children, only to realize they’ve raised a mini-adult who’s clueless about finances—and just a few years away from being out on their own.
“Nobody says, ‘Now is the time to start talking about money,’” says Liz Frazier, financial planner and author of Beyond Piggy Banks and Lemonade Stands: How to Teach Young Kids About Finance (and They’re Never Too Young). But even if you don’t explicitly teach them about money, your kids are absorbing lessons, ideas and attitudes from a very young age. “Kids have already started forming money and financial habits by the age of 7,” says Frazier. They’re picking up ideas online and from their peers. And they’re also watching and learning attitudes about money from the most important source: you. “Even if parents aren’t intentionally teaching their kids about finance, they’re still teaching their kids about finance,” says Frazier. “Be intentional.”
But if you’re a little behind, don’t panic: There’s plenty of time to help your kids go off to college or their first job with the financial savvy they need to become successful adults. “It’s never too late to understand finance,” says Frazier. “No matter what age you are, it will have a positive impact on your life.”
Here’s how to make up for lost time and teach vital financial lessons to your teenage child.
1
Focus on Purpose
In early conversations about money with your teenager, Frazier recommends keeping your opinions neutral. (And yes, that may mean putting aside any negative feelings you have around money and finances.) “Money isn’t good or bad,” says Frazier. “Teach your kids that money is a tool we use to reach our goals.”
2
Encourage Earning
With teenagers, you don’t have to be theoretical about the vital connection between working and earning. “It’s really important for teens to start earning their own money,” says Frazier. “It gives them skin in the game.” Whether they’re getting paid for doing chores, performing tasks for neighbors or holding down a formal part-time job, the point isn’t the money itself. “They’re learning the direct correlation between working, saving money and reaching goals,” says Frazier.
3
Help with Budgets and Goals
Now that they have money, says Frazier, it’s critical that they learn to save. Help them create a budget that accounts for their earnings and expenses, and that shows them their net gain every month. Then lay out a savings plan for reaching their medium- and long-term goals—and don’t stress too much about what they choose to save for. “The savings goal doesn’t really matter,” says Frazier. “It might be to save for college, or maybe they’re just saving for something they want. What’s really important is learning the positive habit of saving.”
4
Set Up Bank Accounts
Hopefully, your teenager is earning more money than will fit in a piggy bank. Frazier recommends setting them up with both a checking account for daily expenses and a savings account dedicated to their money goals. When you open the savings account, teach them the concept of compound interest. “Demonstrate that by saving money, you can earn money,” says Frazier. “It’s a really important lesson for going forward and getting into investing.”
5
Introduce Bigger Concepts
Don’t shy away from teaching your kids about investing. Talk to them about the basics of stocks—that companies use them to raise money, and that by owning shares, you can earn (or lose) money. Together, you can track a company they find interesting and relevant, like the one that manufactures the phone they’re constantly attached to. Similarly, you should explain how building a good credit score can impact their ability to get a loan, buy a home and more. (Learn more about how credit scores work.) And while you’re on the subject of credit, teach them the responsible use of credit cards. “They’re going to be flooded with credit card offers when they turn 21,” says Frazier. “And they need to fully understand that if you use a credit card, you’re borrowing money with interest.”
6
Manage Future Expectations
Talk to your child about their future. Based on your family’s values and financial picture, set expectations about what financial assistance you’ll be providing for college or other expenses. “Be very clear and tell them, ‘This is the amount we’ll pay for in college, and this is the amount we’ll pay for after college,’” says Frazier. “And be very upfront about student loans and college costs.”
In a society where money is still a taboo topic—even in families—this may feel uncomfortable, but push past that feeling. “You’re not scaring them,” says Frazier. “You’re preparing them.”
Julie Anne Russell is a Brooklyn-based freelance journalist. She writes on personal finance, small business, travel and more.
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