It is a well-known fact that teenagers know everything.
At least they think they do. Sure, their knowledge of specific topics is pretty impressive, like video games and Dua Lipa (I literally just heard of her yesterday; apparently, she’s a pop star). But teens have a lot to learn from their parents: especially about money. With an organized plan to make sure we impart our money wisdom onto our kids, they should be well on their way to being money-savvy adults. Let’s break out that crystal ball because here are the 6 “thank-yous” you will hear from your teens in the future.
1. Thank you for teaching me how to budget
First of all, you’re welcome. And I’m glad I taught you some manners. A budget is critical for anyone, whether they are kids or teens or adults. Learning to budget in these formative years is going to set the spending stage for the years ahead. Some key points to teach teens are:
- Create a balance in your budget – be specific and clear with your spending and saving categories.
- Live within your budget – if you overspend as a teenager, you are flying into the danger zone as an adult.
- Teach a system and stick to it – for example, the 50/30/20 budget (50% needs, 30% wants, 20% savings/debt) is a popular one.
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2. Thank you for showing me how to buy my first stock
Historically, the stock market is the most powerful, reliable investment space available. To create real wealth, you need your money to grow exponentially over time. Hello, compound interest! Getting teens interested in stocks, and showing them how to buy their first one will give them a huge leg up.
- Explain the basics of stocks. It can be very complicated when you are just starting; simple ideas like, “buy low, sell high” can help them understand.
- Use concrete examples. Microsoft, to a teen, is most likely boooring. But it is a $1 trillion company, and its stock is expected to rise steadily over time. Others, like Tesla, are pretty cool. Its CEO moonlights as a rocket-launching space explorer and an inventor of the Hyperloop – whatever that actually is. Tesla’s stock is very volatile, though, and is not for everyone. Show the differences among stocks as far as risk tolerance.
- Walk your teen through the process of actually buying stock. You will need to have a funding source, such as a checking account, along with a brokerage account, like E-Trade or Robin Hood. Once the money is sent from the checking to the brokerage account, submit an order to buy, and voila! You are a stockholder.
- Make sure that teens know stocks are for the long haul. As Warren Buffet says, the best time to sell a stock is “never.” Buy a quality first stock and hold on.
3. Thank you for gifting me personal finance books
I know. Your teen thought these were the books you read to put them to sleep when they were little. In reality, these are the ones that will help you sleep well as an adult. You have likely read/skimmed those personal finance books in your bookcase. Hand them down!
- Try to gift an assortment of materials. Many personal finance books repeat similar ideas. Diversify into specific topics, so teens have a toolkit to work with.
- Have teens explain, in their own words, the concepts they learn.
- Apply these principles early, beginning with allowances and their first jobs.
- Encourage kids to begin a personal finance library to build as they get older.
4. Thank you for teaching me how to save
Teens sure know how to spend; they can be taught to save, too! Having a money management system can help a lot, such as using Spend-Save-Give jars. Saving becomes part of kids’ routines, moving through the teenage years into adulthood.
- Start saving from a very young age. The earlier, the better!
- Offer to match savings with your child. This can be encouraging – their money grows twice as fast! Also, it shows the power of teamwork and builds a strong bond with kids.
- Show them how to set savings goals. Saving for a large purchase that they really want, like a car, can be motivating. Figuring out how much to set aside each month can help them monitor their own savings.
5. Thank you for shaping my abundant money mindset
So gracious today! But the truth is your teen’s view on money is all in their heads. They are likely either going to think that money is great or that money is evil. An abundant money mindset is enjoying money, knowing that you have enough, the enjoyment of giving money. In short, it is the belief that money is positive, and there will always be plenty around.
- Explain to your teens the ideas of scarcity vs. abundance. There is always an opportunity, you just need to know where to look.
- Giving and saving can feel just as good (or better!) than spending money.
- Money is not evil. It can lead to great things.
- Abundant money mindset is a belief in yourself. The rest will fall into place.
6. Thank you for opening a 529 college savings account
Many parents don’t opt to open a 529 account, but it is a really great tool. College is (unbelievably) expensive, so any way that makes it easier – and cheaper – to save for it is a plus in my book.
- Regular contributions, starting when your kids are small, will cover most or all of the college tuition. Your balance grows over time, too, as it is invested in the market.
- 529 withdrawals are not taxed. Not. Taxed. (If the withdrawal is for anything school-related.)
- Anyone can contribute to your child’s 529. You hear that, Uncle Bill?
So, there you have it, my soon-to-be-adult: the money knowledge you will thank me for giving you as a teen. Stick to these 6 ideas, and you should be financially ready for your future! Now, go listen to your Dua Lipa – whoever that is.