By Carol H Cox
Public school systems that offer personal finance courses are still the exception, and not the rule. The 2016 Council for Economic Education Survey of the States found that only 17 states required high schools students to complete a course on personal finance. State public educational systems are huge bureaucracies that take a long time and a lot of energy to change course. We can’t solely depend on public education to provide the personal finance training that our children need to prepare them for post-high school life. We parents need to fill this void.
According to a 2015 survey by Junior Achievement, 84% of teens say that “they look to parents for information about how to manage money.” And a 2016 SallieMae study, “Majoring in Money,” found that 71% of college students said that they learned money management from their parents.
We parents and guardians are clearly on the front line. We are primarily the most influential and trusted source that our children have for information on money matters. The world of personal finance can be intimidating and confusing. It’s up to us to help our teens understand the basics of money management.
Overcoming Reluctance
As parents, we need to get over the hurdle of believing that our finances have to be perfect before we can offer advice. Our finances will never be immaculate. There will always be blemishes and problem areas that we need to address. We are human beings—we make mistakes. (I certainly have made my share of financial mistakes!)
In fact, admitting to our sons and daughters that we have problem money areas may take away some of the stress of talking to them. We no longer have to pretend that everything is perfect. And our children may appreciate the honesty and feel that they, in turn, can be more forthcoming with their worries.
We are at ground zero. This can be the start of a profound shift in how are children’s lives unfold. The personal finance choices they make as adults can affect many areas of their lives.
Following are three possible methods to use to teach personal finance concepts to our teens:
Personal Stories
It’s so much more relatable and interesting if we use stories to illustrate a point. Information is more digestible and memorable when delivered as a story.
For example, I’ve told my daughters, when they were teens, about how my husband and I got into debt trouble when we first got married. As a young couple we didn’t have a good grasp on how best to use credit cards. We had each had a card in college, but they had had low borrowing limits and we weren’t in the habit of using them much. But once we tied the knot, combined our finances and now had decent paying jobs, we got a joint credit card with a much higher limit.
To make a long story short, we blithely went about charging all kinds of stuff on the card without much thought of how we were going to pay it off. (And, believe it or not, I had a degree in business!) Before we knew it, our balance was several thousand dollars. It took us over two years to pay it off. It was very stressful and we wasted a lot of money on interest expense.
My children were surprised and amused by the story, but more importantly it got them to realize how easily and quickly anyone can get into financial trouble and that there is a way to dig out.
And the stories don’t necessarily have to have personally happened to you. They can be an anecdote that someone told you or a narrative news items. Stories can make a lasting impression.
A Good Book
Imagine being 18 and bewildered by the constant flow of information about rising interest rates, consumer debt, 401(k) plans, medical insurance, tax legislation, and cryptocurrencies. Headlines provide a never ending barrage of financial snippets but little substance. Your teen may be just as concerned and nervous about being on their own as you are for them. They will probably be relieved to be getting counsel on their finances.
Reading a good basic personal finance book together with your teen can provide a framework for beginning money management discussions. There are good basic books on money management available, some written specifically for teens and young adults. (See a few book suggestions at end of this article—mine being one of them.)
Periodically, weekly or monthly, you and your teen could each choose a chapter in the book you’ve both selected and then discuss it together. The important thing is to start a regular dialogue.
And taking action helps too. For example, if you’re reading a chapter on checking accounts, help your daughter choose a bank or credit union where she can open an account, and go with her to sign up for an account, being a co-owner if necessary. If you’re reading a chapter on credit scores, then go online and show your daughter how to access a credit report—print yours as an example, or get hers, if she has one yet.
In other words, take action to make it real and to emphasize the importance of the material.
Daily Experiences
Think of your daily life as fertile ground for money management educational opportunities. If you’re going through open enrollment at work, selecting insurance plans and retirement savings options, this might be a great time to explain this process to your teen. You could review with them how health insurance works and the different available options. Or you could familiarize your teen with the type of retirement savings options available through your employer and how they work. (And if you don’t understand the options, consider researching them and educating the both of you.)
Another teaching moment might be when your car needs to go into the shop. You could show them the bill and explain about costs involved with ownership: maintenance, insurance, registration, gas, etc. No doubt, there are numerous other routine actions that you take in your daily life that could be useful as educational experiences for your teen.
These are just a few ideas of how to get started talking with your teen about money.
Now, while our sons and daughters are still living at home, is an ideal time to give them counsel on some of what they need to know about personal finance as adults. And we don’t need to be perfect money managers in our own lives to give advice. Our shortcomings can be used to illustrate points, as can everyday experiences. And there are books and other material available to help us.
Undeniably, we are the most important resource for helping our teens gain financial literacy and we need to take this job seriously—before our sons and daughters have gone off on their own.
Book Suggestions:
- Personal Finance for Teens by Carol H Cox
- The Complete Guide to Personal Finance for Teenagers and College Students by Tamsen Butler
- Get a Financial Life by Beth Kobliner
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