If you’ve ever wondered why they don’t teach teens about money in school, you’re not alone. Chances are, either you or your friends have asked this same question. Until the school curriculum changes, teaching teens about money in the real world remains in the domain of parenting. And this isn’t something that should be left up to “life’s lessons.” If your young adult goes off not understanding how to handle money, their financial missteps will eventually come back to haunt you. Just think about your next door neighbor, whose adult son came back home to live with them after losing their job. Or your friend’s daughter and husband, who are now under foreclosure and facing homelessness. These are harsh lessons to learn when your adult child has a family to provide for. But you can help a lot right now by using the following tips to teach real world money lessons.
Keep Up On Tech
First off, you can’t afford to ignore the latest technologies quite yet. Leave that to your golden years when your kids have learned their money lessons from you. For now, you need to keep up with all the new ways that the younger generations are using to save, spend and invest. Otherwise, there’s a good chance your good intentions and good advice will be dismissed as irrelevant or passé. You don’t want to hear words like, “They don’t do stuff like that anymore, mom.” or “That’s not how people get rich nowadays.” These words sound naive to experienced adults, but the reasoning behind them should be paid attention to.
In order to be heard and for your advice to be respected and—dare you hope, actually followed—is for you to be current on the latest tech and finance terms and methodologies. This includes things like cryptocurrency, AKA crypto, fintech, Apple Pay, and more. If you can find a course at your local library or online, you’ll absorb the information you need so you can have an informed discussion with your teen about finances. Knowing about and understanding how the current generation views money will help bridge the gap between you and your teen so that you can teach him or her the basics of economics that will never change.
Take the Time
Next, you need to take the time—and patience—to spend with your teen in the real world. That means bring your teen to the dreaded grocery store, where they can learn all about money in the real world. First, bring them to the meat counter, and explain the labels; how the price per pound varies with the different cuts. Explain how the more processing is done on the meat, the more expensive the meat. Walk down the aisles and explain how the more expensive items are at eye level, while less expensive versions are placed lower and higher. Bring your teen to the bank when you need to talk to the manager about a business loan. Better yet, let your teen help you assemble your loan application documents. Explain how the organization and presentation play a role in whether the application will be accepted. Show them the loan documentation so they can see how much you’ll pay in interest over time. Your teen may not show interest in the beginning, but if you show them the respect of teaching them, eventually they’ll show the same respect by paying attention.
Be Transparent
In previous generations, household finances were a deep family secret. Children weren’t privy to where money came from or how much was in the coffers. Today, it’s really better to be communicative with your teens about household finances. You don’t have to give up all your privacy, but you should have open conversations with the family about money without excluding the teens in the household. For example, if you recently got a raise, tell your teen about it and explain how you’re going to put the extra money into an investment account instead of upgrading your lifestyle, and explain why. If you recently got laid off, explain how and why you have six month’s salary in the bank, so the family has some breathing room until you can find another position. Just being honest and open about your household finances will take away a lot of the mystery about money that teens often find so confounding. Lead by example, and be vocal about what you’re doing.
Explain the Repercussions of Bad Money Management
It’s shocking how many young adults have no idea that they have a credit score and a credit report. As a fiscally responsible adult, you know that missed payments and high revolving debt decrease both your score and your attractiveness to lenders. The only way to teach this to teens is by sharing your credit report with them. Sign up for MyFico and go through the various credit score ratings. Review your credit report and point out times in your past where a missed payment happened, or point out your stellar on-time payment record. Talk to your teen about how their credit score will impact whether or not they’re approved for an apartment lease, a credit card, a car loan and a mortgage. Explain the seven-year rule and how that’s a long time to wait for a small mistake in judgment to be cleared off the record.
One of the people in your corner, when it comes to talking to your teen about money, is your CPA. The next time you have a meeting scheduled, ask if it would be okay if your teen joins you, simply as a listener. Having the opportunity to hear how adults discuss finances and make future plans to manage budgets is worth just as much as a handful of history classes. After all, someday your teen is going to be a responsible adult, capable of making their own fiscally-sound money decisions. At least, they will with your help.