iPads, iPhones and iTouches – the status symbols of today’s teens aren’t as simple as having a $20 backpack versus a $50 one. Today, most school campuses look like they’re corporately sponsored by Lululemon – except the company decided to brand the student body instead of the buildings.
How are parents supposed to teach their kids good money management skills when their kids are surrounding by examples of poor spending habits -the parents themselves potentially included in that group?
To teach teens financial literacy, many parents will need to not only brush up on their own knowledge about money, but may also need to start making changes in how they handle their money as well. Teens are especially sensitive to perceived unfairness in the rules, and will quickly see through a “do what I say, not as I do” scenario.
Kevin Cochran developed EnRICHed Academy, a five DVD program designed to teach teens and parents smart money management. “The bottom line is, it’s the parent’s responsibility to teach the kids about money,” says Cochran. “And the reason why most kids can’t save money is because their parents can’t. Parents can and should educate themselves along with the students.”
“There’s a lot parents can to do help their kids develop good financial habits, and to assist them as they graduate, move into the workforce and start a family,” agrees Rob Carrick, one of Canada’s foremost experts on money management.
Carrick suggests parents check out a free online program offered by the Financial Consumer Agency of Canada (FCAC) and the British Columbia Securities Commission. This comprehensive learning program called The City is comprised of 10 modules that teach teens and young adults financial skills related to needs versus wants, income, budgeting and investing. Teens can create a free account at The City and begin working at their own pace, and with the help of their parents.
Parents of older teens might consider picking up a copy of Carrick’s latest book, How Not to Move Back in With Your Parents: The Young Person’s Guide to Financial Empowerment. It’s the perfect read for teens and parents alike. But Carrick cautions against teaching in theory alone.
“Teaching on a blackboard is good and useful, but it’s not the whole solution. I wouldn’t expect that we can educate to a high level of financial intelligence on paper,” says Carrick. “It’s actually handling money and being responsible for the decisions through allowances and part-time jobs that teach students the principles of saving and credit.”
Here are some practical tips to follow to help your teen understand money.
• Set up a system that involves them paying for their wants, and some of their needs, through helping out around the home or by working part time. Studies show that working teens get better grades and learn financial literacy earlier than those who don’t work.
• Start talking about money in regular conversation. Explain how income tax works, the importance of saving and investing, and consider sharing your household finances.
• Institute a savings plan for them. Some experts disagree, but I suggest you insist your teen save 10% of their income from the day they begin earning their own money. Have them read David Chilton’s The Wealthy Barber if they complain, where they can learn more about the power of regular savings and compound interest. I’ll be insisting on this habit just as diligently as I insist on my kids’ brushing their teeth at night.
• Explain how credit works. Be sure to make sure your teens understand that most lenders are not working in the teen’s best interest, and will happily give the teen enough rope to hang themselves financially.
Whether your child is 13 or 19, it’s not too late to teach them smart money skills that will help them begin their adult life on the right foot, financially speaking. In the process, you may find yourself learning many valuable lessons as well.
Sarah Deveau is a mom of three, and the author of Money Smart Mom: Financially Fit Parenting. Visit her website at www.moneysmartmom.ca or pick up her book from Chapters Indigo.