Maybe your son or daughter is a genius and sitting them down in front of an Excel spreadsheet is the way to go. Maybe they have natural instincts to save their money, but most kids don’t. As soon as we get those 25 cents it’s off to spend it on candy (how much is a moon pie?). That’s the story for most adolescents, but like the sponges they are, they can be taught fiscal responsibility.
Budgeting and saving is the easiest part to pass on because kids want so many things. Want the $80 video game? Time to save. A savings account is always a good start and a smart decision for the future. If an allowance is $20/week, $10 must be put away, no questions asked; they may not like it, but this gets them into the habit that all the money we earn can’t be spent right away.
Teaching a teen about taxes is both important and could be a lot of fun for parents. Taxes are generally not discussed in school, so a good place to start (if they don’t have a part-time job) is yard-work or other household chores. After you’ve agreed to pay $100 bi-weekly to clean all the dirt and grime, when it comes time for payday remind your youngster(s) that reality is a harsh mistress and tax them 15%. It’s better they learn the feeling now than later when they see deductions from their first pay cheque.
It’s hard to appreciate money if you haven’t earned it yourself, which is why it’s important to explain the dangers of credit cards. Creditors prey on youngsters when they get to college, offering low-credit accounts in exchange for t-shirts and swag, potentially ruining their credit for years to come.
A good strategy is to use credit cards for emergencies only or when we have the money to pay it off immediately. Experience generally comes with time, but the more we prepare them to avoid soul-crushing debt, the better.