This article may include partner links. If you click, visit or buy from these links, we will receive a fee or products from the companies mentioned in this post. Please read our disclosure policy for more details.

 

 

“Only 1 in 6 High School Students Nationwide Required to Take Personal Finance Course To Graduate” – Study by NextGen Personal Finance

 

 

I had the chance to listen to Pat Flynn’s SPI podcast session #234 where 17-year-old Eva Baker of TeensGotCents.com was the guest and I was totally blown away by this young lady.

 

On the podcast, Eva shared how she started out her blog as a project when she was just 16, then as she learned and researched about personal finance and got to attend the FINCON meetings, and was embraced by the FINCON community, she shared how the relationships she established with Personal Finance bloggers and other like-minded entrepreneurs inspired and motivated her to grow her platform as an advocacy for financial literacy tailored toward teens.

 

Having a 12-year-old myself, I got to thinking; how can we as parents motivate our teens to think about financial literacy when most of them are more interested in Instagram, Pinterest, and their phones?

 

How can we communicate the importance of financial literacy at an early stage and have them understand that it is foundational for their future success?

 

The following are some financial lessons that I had to learn the hard way; that I wish my daughter and all young folks learn early, so they can avoid making the same mistakes most of us do and not hijack their financial futures.

 

 

THE CONCEPT OF MONEY vs. TIME

 

I think most of you will agree that earning money comes as a result of working, and sometimes working harder than usual. I’m not talking about passive income or those who’ve inherited and didn’t have to work. I’m merely pointing out the fact that to get money, most of us work for it.

 

The ultimate tradeoff though is time. We trade our time, time we could spend on what we value, and trade it away in return for money.

 

Now since it comes at a huge cost, since time is a more precious commodity in that it’s something that when spent doesn’t come back, we have to make our children aware that we sacrifice time away from them because we need to earn money to support the family and our everyday needs.

 

I often remind my daughter that I’d much rather spend my time with her and my wife rather than slaving away at work, but unfortunately, most of my time is spent at work.  My goal is that by doing so, she’ll get a sense that the money we get to spend comes at great cost; that way she’ll learn to value it more.

 

 

HOW TO EARN MONEY

 

After our teens get a sense of the value of money, we have to teach them how to earn it themselves.

 

Since money “doesn’t grow on trees” even though most of them think it does, and we established that it almost always comes through hard work, I often remind my daughter what she can do to earn money if she wants to buy the latest gizmo or fashion accessory she’s been eyeing online.

 

The good thing about the current generation which I surely didn’t have growing up is – technology.

 

Nowadays there are multiple ways to earn money online, through selling sites such as ebay, craigslist, offerup and letgo as examples. So my wife and I coach and train our daughter to look at opportunities to flip merchandise by buying items that appeal to her peers such as makeup, clothes, shoes; finding out where to get them at a discount, in order to sell through these online sites and make a profit.

 

We believe that by training our children to approach financial transactions like a business, with cost, margin, and profit; they can get a better handle and learn to value money as something to be earned through hard work so they won’t mindlessly fall into the consumerist mentality of spending just to consume.

 

 

HOW TO BALANCE A CHECKING ACCOUNT

 

We opened up our daughter’s savings and checking account a year ago when she turned 12 after she got a sizeable chunk of cash for her birthday and the holidays.

 

We pay our daughter $25/week in return for doing set chores around the house. By doing so, we teach her that everyone works in our house and nothing is free, her salary gets direct deposited and we teach her to use online banking.

 

We wanted her to get started early on how to maintain and balance her very own Checking Account, with my wife as the co-holder of course.

 

By introducing her early, she gets a chance to familiarize herself with how the financial system works; and how to access money, provided of course that she does her work so she can have her pay deposited online.

 

 

LEARN TO SAVE EARLY AND OFTEN

 

There’s a great analogy by Dave Ramsey where he illustrates how teens can become millionaires if only they get started saving early.

 

It’s the story of Ben and Arthur and the contrast of saving early versus later in life.

 

In it Ben started saving at 19 by putting in $2000 a year for only 8 years and stopped, versus Arthur who started nine years later at 27putting in the same amount of money and doing it continuously until the age of 64.

 

By the magic of ‘compounding interest’, using 12% in this example, Ben’s yield was remarkably higher than Arthur’s by $700K, even though he only put in $16K as compared to Arthur’s $74K total; all because he started early and let the money compound like a snowball.

 

By showing my daughter this possibility and reminding her that time is on her side, she can set herself up to be a millionaire by being disciplined and start saving early in order to generate the same or better yield for her future nest egg.

 

I believe that the more we engage and talk to our teens about saving, managing their money, and saving towards their retirement; we can ultimately help change their behavior and set them up to be better off than we were at their age.

 

 

LEARN HOW TO BUDGET

 

I asked my daughter once if she knew what a budget was; she just nodded and mouthed off words to the effect like a budget was something that we write on paper to track where the money goes.

 

In a simple way, she’s right; but more importantly, I told her that it’s not only putting down on paper what comes in as income and goes out as spending, it’s supposed to instill discipline in that she should only spend what’s on the paper and nothing more.

 

By introducing our teens to the concept of documenting their money, we’re training them the concept of living within their means and not overspending which is what makes most people broke.

 

And if they continue with budgeting and making a habit out of it, they’re ultimately setting themselves up to win with money.

 

 

KEEP TRACK OF SPENDING

 

Along with having a budget is tracking how the money gets spent on the budget.

 

By showing our kids cool ways of leveraging apps like Personal Capital, they can see how the money flows as well as give them a sense of their ‘net worth’ which is their assets less liabilities, which should be zero to begin with, to make them motivated to grow their assets even more.

 

Another value of training them to track their money, they’ll have a sense of what they’re spending their money on, whether entertainment, gizmos, experiences, etc; and will learn to assess where their priorities are as individuals and can adjust accordingly.

 

There’s a good verse that says ‘where your money is, there your heart will be also’ , so by seeing how their money is spent, it can eventually lead to lifestyle changes for the good that will result in responsible living.

 

 

 

SHOP SMART SPEND SMART

 

A great way to help your teens learn about saving and stretching their hard earned money is to train them to shop and spend wisely.

 

Train them to look for bargains and to use cash whenever possible to negotiate a better deal.

 

In other cultures, it’s customary to haggle and pay for things wholesale; it’s also high time to teach our young ones that it’s okay to ask for a discount, we’re not ripping anyone off but at the same time, causing them to get more value for their money.

 

The key is to encourage them to avoid ‘impulse buying’, which is how advertisers today entice and trap young kids to part with their money.

 

There are a ton of apps that help with deals like slickdeals, techbargains, groupon and dozens of others. 

 

By reminding our teens to use their favorite app to comparison shop first, and if possible using coupons, they set themselves up to get the best deal and value for their money and come away with a win-win situation.

 

 

SET FINANCIAL GOALS

 

I often remind my daughter that she will eventually get to our age and ALWAYS encourage her to not make the same mistakes we did of not having any financial goals.

 

Whether earning a degree and not being in debt, saving for a car, trips, life event, and even retirement; by preparing in advance for these through saving, she’ll lessen the anxiety it may cause and result in a better financial state.

 

 

 

CONCLUSION

 

So to wrap up, I guess my biggest takeaway with all this money talk is this.

 

DISCUSS FINANCES with our teens, and often, however awkward it is; they’ll eventually get it.

 

We’re open about our household income, how we give and where, our budget, what we spend on and what we value with our time and resources; even our retirement planning, we share with our daughter. In that way, she gets to be comfortable with details so when the time comes and it’s her turn, she not only gets it but will excel at it.

 

Do you have other tips that can help guide our teens financially? Please share by leaving us a comment here or emailing at thedebtfreejourney@gmail.com

 

 

Until the next post…

 

 

Peace and Blessing to you All.