How to Discuss Finances with a Teen

What to tell you teenager when teaching them personal finance? You know its a necessary evil, that constant advertising for every new and cool gadget out there. Read on for some tips on talking to your teen about finances.

Instructions

Difficulty: Moderate

Things You’ll Need:

• Patience--lots and lots of patience
• 30 minutes or less each week

1. Get their attention! Best way to teach a teenager anything is by letting them do whatever you're trying to teach them. Consider getting your teenager a pre-paid debit card or a real life active checking account. You could use a credit card but set the limit very low around $100 to $200.
2. Explain that money doesn't go on trees and that you are taking a substantial risk trusting them with this responsibility. You do not have to talk about eating dirt if you were less fortunate; but explain to them that financial irresponsibility has real life consequences.
3. Go over the math basics of the account. Give a real life example like this:
   
   $10 for lunch at the food court
   $25 for a new t-shirt on sale at The Gap
   $15 for their movie date and popcorn
   
   Explain that since he/she spent a total of $50 when your teen only had $100 on the pre-paid debit card. So they have to make your remaining $50 last until their next pay day (which is really an allowance).
   
   See how they make this work. If they stick to it, great job but keep looking over their shoulder. If they run out of funds, sit down and go over how they ran out of funds. If it was an honest mistake, a one time thing or you forgot to transfer their allowance, you should look over it and detect what went wrong. Explain and explain it all over again until the accounting problems are remedied.
4. Follow up each week and keep track of their expenses online. With our banking system today, you can monitor each transaction within minutes of their purchase. You can even get email alerts with some banks.
5. Reward their progress if its deserved. Money management is a great tool for a young adult to have, so continually push your teenager(s) to learn new and different types of finance related topics every month of so. Email them an article from your favorite financial planning website to get them interested or at least speed up their learning curve.

Tips & Warnings

• Your local bank should be able to set you up with a free debit card and will automatically transfer funds into their account on the dates and quantity of funds you require. Take advantage of their free services and an electronic banking system that you are familiar with.
• Keep the debit or credit account at a very low balance. Teenagers often misplace things; so you don't want someone spending your hard earned cash during a "how to" experiment.