Talking Finance with Your Teen

studying by Steven SBy Curtis Smith, Thrivent Financial

When Maria Rodriguez starts a conversation with teenagers about money, she often hears them say that if they could buy whatever they wanted, they would be happy. Even her 16-year-old son used to have that attitude. But Rodriguez, a Thrivent member who works with teenagers, pushes teens to think harder. She asks them to name pop-culture icons who are unhappy despite their wealth. Once they do that, it is easier to see that money is not the root of all happiness.

It is not always easy for parents to talk about money with their teenagers, but it is a valuable conversation to have. Here are five money lessons to help your teens prepare for the financial independence you may want them to learn.

Share first, then save, then spend. Encourage your children to give away 10% of the money they receive as gifts or earn from their jobs. The practice teaches teens generosity, and gives them a taste of how good it feels to share what they have made to help another.

Practice using credit. Once teens have their first job, it can be a good idea to have them sign up for a credit card. Parents may need to co-sign, but the card should be the teen’s responsibility. By learning to use a card with a low spending limit, teens can begin building their credit. Building credit is important as they will need it when the time comes to move into their own apartment or when they want to purchase a big-ticket item, such as a car.

Use technology to fight impulse buys. Encourage teens to use their phones to avoid impulse purchases. For example, if they see something they like while shopping, suggest they snap a photo of the item and its price tag. Having a picture gives them a sense of instant ownership, and if they really want it later, they can go back to purchase the item. More times than not, they will find they don’t actually want the item as badly as they first thought.

Distinguish between wants and needs. While paying for their basic clothing is common, encourage them to pay the difference if they want a more expensive brand than you were planning to purchase for them. This shows them the difference between needs and wants, and encourages them to save for items that are more special to them.

Put money in the bank. Try depositing your children’s allowance into a bank account rather than giving it to them in cash. This practice teaches them to read a bank statement and makes them more thoughtful about spending. They can watch the total go up to $100, then $200, then $500 — and if it is their money, they are usually much more discriminating about withdrawing $20 to go to the mall.

In addition, a growing number of mobile apps are taking the pain out of money management. Here are few that look interesting:

  • The Mint app automatically pulls all financial accounting into one place, so it’s easy to create a budget and pay bills.
  • SmartyPig is an online piggy bank that helps users save for financial goals – and contribute to help other people reach theirs.
  • And there’s even a way to move allowance into the 21st century: iAllowance tracks chore completion, sends reminders and shows progress toward rewards.

While such conversations with your kids can be stressful, it ultimately leads to greater trust. It’s unrealistic to expect them to be perfect, but it is beneficial to everyone to expect them to try.

Thrivent has several options to help teens and families learn how to be wise with money:

  • The “Parents, Teens and Money Matters Workshop” can help families discuss how money helps them live out their values. The teens receive the Cash Cache personal finance organizer, designed with pockets for sharing, saving, spending and investing to help teens keep track of their money. The parents receive a discussion guide with exercises and discussion topics to keep the money conversation going.
  • Thrivent Federal Credit Union offers students checking package that includes a line of credit of up to $500 to help students establish good spending habits and build their credit while enrolled in college. For convenience, the line of credit incudes free ATMs for students to access while on campus.

Curtis Smith is a Thrivent Financial Representative. He can be contacted at this link. Thrivent Financial is a generous supporter of the work of the Oak Park Regional Housing Center.