Parenting Teens with Great Money Skills: The First Step to Reaching the Goal

In the last post, we looked at one of the most important and revealing conversations you can have with your teen:  A discussion about his or her ultimate financial goal.

Once your teen has established a financial goal, the next step is to teach him how to reach that goal over time, and to help him realize that this goal is attainable.

Don’t worry – it’s a simple process that only requires a few elements.

Here’s a way to get started:

  • If you haven’t already, consider having your teen open a “financial freedom” account, which will take in money, but never give it out (explanation to follow).  It doesn’t have to be fancy – it can be as simple as a savings account.   Please note:  I strongly recommend that you involve your teen in this process!  Doing it for your child prevents him or her from developing this habit.   Habit development is the goal here, and the measure of success.
  • The basic idea of this account is that your teen will contribute 10% of all the money he receives.   You and your teen can figure out a system for managing the account.  For example, you can connect your teen’s checking account to this special savings account.  Deposit all money into the checking account—paychecks from afterschool jobs, babysitting money, allowance.  Then, every time your teen deposits money, he or she can electronically move 10% of it into this savings account.  The deal is, for this particular savings account, money never leaves.  Never.
  • This financial freedom account is your teen’s ticket to reaching his or her ultimate financial goal.  Make sure he or she knows how to access it, so they can check it often to see how it grows!
  • You can show this chart from the WealthQuest for Teens Basic Seminar online video to your teen.  NOW compound interest charts start to become interesting!  

  • At some point, the money in this account can be moved into one that grows faster than a bank savings
    account.  (This is an individual decision, and I recommend that EVERYONE consults a financial advisor that is trusted and
    known, and stay engaged in the decision-making process).

Please share your ideas, questions, suggestions, and successes on teaching your teen to this important savings habit. We’d love to learn from your experience!

© WealthQuest for Teens, Ltd., 2011 All rights reserved worldwide.

Financially Literate or Financially Fit?

Do we want our teens to be financially literate or financially fit?  Do we want them to have a lot of information, or do we want them to have great money habits: saving, spending, earning, investing, giving, and learning?

People love to say, “They should teach personal financial literacy in schools,” as if that would solve the problems of a society of people who don’t know how to manage their money well, make informed financial decisions, or build wealth.

It would be great if all high school students learned about money and how it works.  But let’s not kid ourselves.  Information is nice to deliver and measure, and that’s what schools do best.  Financially literate people, it has been shown, DO make better financial decisions.

Still, what good is information if it doesn’t translate into habits?  Know any doctors or nurses that smoke cigarettes?  (EVERYONE knows they are not part of a healthy life.)  I know someone with a Ph.D. in Nutrition who is at least 150 lbs. overweight.  No offense, but it’s a great way to prove the point.  Actually, we ALL know stuff that we don’t do but wish we did.  The point is, information doesn’t make as much difference as we like to think.

Aren’t we more concerned about the actual habits of the teens in our lives?  If teens don’t have great money habits now, what makes us think that will change one day?  How will they deal with the financial realities of adulthood?

As an educator, my goal is to provide parents with resources that teach teens information AND motivate them to adopt wealth building habits.  Habits take a while to take root, and they are HARD to break.

Parents know how to teach their children to have great dental hygiene habits, they know how to teach their children to do well in school, they know how to teach their children to get along with others.  Even if we aren’t perfect about it, we basically KNOW what we should be doing.

Money skills is a bit different, though.  Most parents don’t know where to start with their kids in this area.  We aren’t talking about it much, either.

So, what to do?  Where to start?

The FIRST thing to talk to your teen about is goal-setting.

What is your ultimate goal with money, long term?  Would you like, say, to be able to stop working for a living at age 50?  40?  How much money will you need to save so the interest will sustain you?  Why would you want that?  What will you be able to do–for yourself, for your family, for your community, for the planet?

The conversation from this question will reveal a whole world about your teen.  You’ll find out if they have

  • made the connection between money and the life they want for themselves,
  • a positive relationship with money, or if they think it’s hard and boring,
  • a sense of personal responsibility for others,
  • given up on any of their dreams,
  • any clue how to make money grow,
  • they believe they can do well with their money.

This conversation, itself, is one of the most important ones you can ever have with the teenager in your life.

Please let us know how it goes!  What works for you?  What ideas and suggestions do you have for teaching teens to set aside 10% of all income for future financial freedom?

(c) WealthQuest for Teens, Ltd., 2011 All rights reserved worldwide.