Kids and Money: Helping Your Teen Prepare for the Real World

Before they leave the house, how can you prepare your teen to be money savvy? Today we go over the five essential skills they need to know!

Teaching Your Teen About Money and the Real World

Last week, Kristia shared how she’s helping her girls become more savvy and thoughtful with money.

We also go into how to start the conversations so your kid can begin to pick up crucial money habits and learn how to spend, save, and give wisely. 

Because even though money is not the most important thing, understanding how it works can empower your kid to use it as a tool to build a life that they love. 

But to help them prepare takes time. Which can be a challenge in itself. 

Many of us are living full lives. I mean in our case, this week the new school year has started – virtually for us- and now both of our girls are enrolled. 

They have their school schedules, we have our work schedules, and so these next few weeks we’re going to have to test things out and find that rhythm.

And if you have teens in the house, you may feel like time is even further compressed. How do you pass on these lessons while handling your own regular routine and whatever add layers of complexity 2020 has thrown at you?

So today we want to reduce some stress for you. 

We’re going to be looking at how you can help your teen prepare for the real-world, specifically finances. 

In this episode, we’ll go over:

• Five key money skills they need to know
• Creating their post-graduation budget
• Whether or not they should pay bills while living at home

It’s a lot to cover, but I’m excited. Are you ready? Let’s get started! 

Resources to Help Your Kid Become Savvy with Their Money

Here are some of my favorite tools, apps, and resources to get your family working as a team with money! 

• Best Budget and Money Apps: Personal Capital, Tiller, Mint
• Jumpstart Your Marriage and Your Money
• Famzoo: Fantastic tool that allows you to create a family ‘bank’ system that can make managing allowances easier while guiding your kid from preschooler to teen to become financially savvy. 
• The Opposite of Spoiled
• Cash Crunch Games
• Goalsetter
• How to Talk to Kids About College Costs
• What Should Teenagers Do?

Thank You to Our Partner Coastal

Support for this podcast comes from Coastal Credit Union! If you’re living in the Raleigh Durham area and looking to bank better, come check out Coastal today!

5 Key Money Lessons and Skills to Pass on To Your Teen

First off let’s get this out of the way – this is not a comprehensive list of every money skill and habit teens could learn about. 

As much as we want to do our best to prepare them, I don’t think any parent could predict what’s gone on so far in 2020. 

And that’s fine. 

When I worked on this list and was trying to narrow it down, I had a few things in mind. 

One, I wanted to focus on skills that they need as an adult and they could practice and learn at home many times. 

Two, I tried to keep these lessons align with skills they’d need to get on and be on the path of financial freedom. 

Finally, as we talked about last week on the podcast, parenting is more than teaching skills. We have to lead by example, including being open about mistakes we’ve made and showing our kids and teens they can turn things around. 

I think 4 out of 5 you’d nod your head along and agree, but there’s one that may throw you off, but hear me out on it. 

Let’s talk about five essential skills teens should know and become comfortable doing before they leave the house.

1. Creating (and Sticking with) a Budget
2. Learning to Save for Short and Long Term Goals
3. Understand How Credit Cards, Credit Scores, and Debt Works
4. Have an Affordable Plan for their Education
5. Have Them Work for Pay

Some of these topics are not going to be covered in a short span, so starting early is really vital. 

Creating (And Sticking with) a Budget

If they're like most people, you might have to first change their perception of budgets.

Many teens and let's be honest adults see budgets as a restriction. But at its core, a budget is simply a plan to move your money towards what you need and what matters most to you.

The three targets that a successful and sustainable budget should hit are:

• covering your essential bills,
• making sure you have enough set aside for emergencies and future goals. And then, yes,
• having some money that you can enjoy now,

Having your teen understand and be able to create a budget that hits those goals not only puts their finances in a good position, but it also opens up more options for them down the line for whatever goals they may pick up through their journey of life.

Saving for Short and Long Term Goals

Now, the second skill or lesson is helping them learn to save both for short and long term goals. This is something you want to instill in them early.

Saving is a habit that will serve them well, not just with the numbers, but because you're passing on a lesson and plenty of practice time with delayed gratification.

There have been a few studies that followed kids into adulthood and found that those that were able to practice delayed gratification were more successful beyond just the finances.

Depending on what path they take, their income may change based on the career that they choose. But if you teach them how to save, that's a skill that they can use for whatever personal or professional goals that they have.

Understand How Credit Cards, Credit Scores, and Debt Works

Believe it or not, having this lesson about delayed gratification ties into this third money lesson that they need to know understanding how debt works.

It may not seem like it makes sense for a podcast that focuses on helping families achieve financial freedom to talk about debt, but there are plenty of money woes and stresses that are tied up into jumping into debt or paying more to get what we want now.

So if you're teaching your child about savings, you should also teach them about how debt works.

You may have very strong feelings about this. You may feel like all debt is bad debt or you may feel like there's good and bad debt, like a mortgage is fine, but having credit cards is bad. And you may have very good reasons for why you feel the way you do.

To really help your team be responsible with finances, sit down with them, talk with them. Why this is so important to you? Why you feel this way about debt?

It could be from your own personal experience. You saw how it hindered your options, added unnecessary stress, or forced you to stick with the job that was not good for you, but you needed it to simply pay the bills and the debts.

The truth is, they're going to be getting pressure to buy now and pay later. And from personal experience and talking with others over the past 10 years about their money mistakes, not understanding how things such as credit scores work really put them at a disadvantage.

In some cases, they made poor financial decisions because they thought it was going to raise their credit score. So you can fight against those myths and misconceptions and arm them with more information so that they can make wiser decisions with their finances.

Have an Affordable Plan for Their Education

We did an episode on just college expenses last year. Where Drew Snider, a financial planner and father shared his thoughts about smart ways parents can save for college expenses. 

And look, we can have a real deep conversation on whether it’s worth it or not.  I’m actually planning on covering that for the next season, so please send those questions in!

For today, though, I want to highlight, whatever path your child chooses to gain the skills they need for their career, they need to understand the time and financial costs of that path. 

When I was in high school my mom and I had plenty of discussions about my options and also how much she was able to help out. 

Don’t wait until your kid is a senior to discuss the numbers. Start earlier and make these conversations a part of your routine. 

Things to discuss and be open about: 

• What are you able and willing to kick in for college?
• What’s the cost of the trade school, certification, or school they’re considering?
• What are the job prospects? Expected Salary? 
• Is there a way for them to shadow someone in the field? 

Having your kid come in with eyes wide open will hopefully help them choose the right path for them. 

Have Them Work for Pay

Do you remember your first job? My first job was being a data entry assistant for a real estate appraiser over the summer. 

It was work – I got hired during the busy season, but I enjoyed it and learned some skills. 

I know some parents may worry that working can interfere with academics, but unless they’re working crazy hours, your teen can actually be better off having a job. 

• Time management
• Responsibility
• Ownership of their money
• Making Money instead of spending 

Now with the current situation going on, work at an office or at a store may not be the best option. 

If you have a family business, you may be able to create a position, but I know many families can’t do this. 

Another route could be exploring freelancing and entrepreneurship. Something that may fit your teen is online tutoring. 

They could have the technical skills, academic chops, and empathy as a student to be fantastic.

Another benefit to having them work is to give them some insight into skills that they already have and trying out different paths. Don’t wait for a college internship senior year to discover that they actually don’t want to do X YZ. 

As teens, they have the unique opportunity to explore some options while they are at home. It may take some creative thinking and effort, but it’s well worth it. 

Support the Podcast!

Thank you so much for listening to the podcast! If you enjoyed this episode and found it helpful, here are some ways to support it.

• Spread the word! If you enjoyed this episode and think it can help a buddy get on the path to dumping debt and become financially free, please share.
• Leave a review. Honest feedback and reviews make a big difference and gets the word out about the podcast. Leave your review on Apple or Stitcher.
• Grab a copy of Jumpstart Your Marriage and Your Money. My book is designed for a busy couple to set up their finances in 4 weeks. Get tips and tools that have worked for other couples on their journey of building their marriage and wealth together!

Music Credit

Like the music in this episode? It was provided by Lee Rosevere and artists from Audiio.