Teaching Teens about Money

Teenagers are old enough to take money seriously -- and learn some useful life lessons.

by Gary Foreman


As a parent, you have the opportunity to shape your teen's money perspective. Lessons learned now could save him a lot of grief later.

A cornerstone of building a sound financial future for your teenager is to teach her how to save money. Sounds easy, but even many adults don't know how to do it. And that could be because no one ever taught them.

Encouraging Saving
You can use three strategies to teach a teen to save. First, encourage him to reach a goal.

Suppose he wants a $100 pair of shoes. Suggest he save 5 or $10 a week until he has the purchase price. He'll learn patience and persistence - and by the time he saves the money, he might decide he doesn't really want the shoes any more.

Another way to encourage savings is to match any money a teenager puts into a savings account. Set a minimum length that the money must stay in the account before being withdrawn. This won't work for everyone, but some teens love to watch their savings grow.

The third strategy is to teach your youngster to "pay herself first." This means that she set aside part of her income for savings, before spending anything.

Now is an ideal time to learn this lesson. Most teens have no real financial responsibilities. They don't have regular monthly expenses like rent, electricity, or food. Generally, they spend what is available.

Of course, many adults do the same thing. Learning to set part of your income aside for savings is a great habit that will pay lifelong dividends.

Balancing a Checkbook
Do you remember who taught you to balance your checkbook? Most of us don't, and you would be surprised how many people reach adulthood without knowing how to perform this simple task. Of course, checks are becoming obsolete, but that does not mean we don't have to keep track of the money we take out of our accounts via the ATM every month. Balancing that account is the same principle as balancing a checkbook.

Even a teenager should know how much money he or she has because it's essential to understand that you can run out of money. Balancing an ATM account is a wonderful way to teach kids that there are penalties if you spend money that you don't have.

While software makes balancing a checking account easy, make sure the teen does not just enter numbers and let the software do all the work. He needs to understand the basics: You put money in. You take money out. What is left is the balance.

A teenager who embraces even one of these habits is well on his or her way to financial stability.

Gary Foreman is a former Certified Financial Planner who currently edits
The Dollar Stretcher website. www.stretcher.com/save.htm.