Financial Literacy for Teens: How Early is Too Early?

Tell a teenager that money doesn’t grow on trees and chances are, he will respond with a quick-witted reply that money is made of paper and paper comes from trees. Ugh, the dreaded teenage years. But it is possible to teach your teens how to be financially responsible — even if they think they know it all. Here are a few tips.

1. Start the conversation early.

The time to start teaching your kids about money is when they begin learning other social norms, like saying “please” and “thank you.” Establish an open dialogue with your children about how money works and how we speak about money to other people. Help them understand what money is used for by playing games and using real-life scenarios, like going to the bank. It’s also important to let your children know early on that money is a private conversation.

2. Use everyday activities as money lessons.

As your kids enter grade school, use your daily errands as teaching lessons. Try taking your children to the grocery store with you and task them with finding good deals on the items on your list. When you’re at the register, make sure your kids are paying attention to how each item is rung up and how you pay for it. This way, your kids will learn the value of a good deal and that everything has a price.

3. Create a budget together.

As your kids enter their pre-teen and teenage years, “walk them through how to set up a simple budget by helping them come up with a list of their expenses, a list of their income (either from a job or an allowance), and how they’ll manage both so that they’ll have something leftover for savings each month,” says Linda Descano, president and CEO of Citi’s Women & Co. Doing so puts them in control of their money decisions, but allows you to observe from a safe distance.

4. Work together to establish a savings goal.

Kids always want something — use this as a way of teaching them the value of saving. “Encourage them to set aside a portion of their monthly savings — and any gifts that they receive — toward long-term goals, like a car, college costs, or a vacation,” Descano said. Another great idea? “Consider setting up a ‘matching system’ to give them an incentive to put money away: For every $100 they save, for example, you may agree to chip in an extra $25 to help them toward their goal.”

5. Allow kids to make their own financial decisions or mistakes — but keep an eye on them.

Allowing your kids the room to fail is one of the toughest things to do as a parent, but it can also provide them with some of their greatest learning opportunities. What does Bill Hernandez, president of The SpendSmart Payments Company, which helps parents guide their teen’s responsible spending, do? “I give both of my teens a SpendSmart prepaid card, and am able to talk with them about money and spending decisions on an ongoing basis because of the tracking and insight into their spending the card provides,” Heranandez said. “We review their transactions and discuss both good and bad spending trends together, which you can’t do with cash.”

6. Teach them the importance of charity.

At the end of the day, we want our children to know that money isn’t everything. Encourage your teen to volunteer at soup kitchens, food banks, homeless shelters, or to join youth groups that give back to the community in other ways, like park cleanups, tutoring and fundraisers. Not only will they be more appreciative of what they do have, but they’ll also have a wider understanding of the world.