If you have a teenager, you may be concerned about their financial future -- and for good reason. According to one survey by T. Rowe Price, only 3% of kids report having learned what they know about spending and saving in school. So if your teenager is to become a financially responsible adult, it will most likely be up to you to teach them the necessary skills.
But how do you get your teen to appreciate the value of a dollar? Here are three suggestions from our experts to help you get started.
Obviously, one of the best ways for teens to get used to handling money is to get a job, but the hard part is getting them to save. After all, it's tempting for a teenager who has never owned much money to go on a shopping spree on payday.
One strategy that can work well is to match your kid's savings, or to help them pay for big expenses only if they save an equivalent amount of money toward that goal. For example, most teenagers want a car. Tell them you'll be more than happy to match whatever amount they can save toward a car between now and their 16th birthday (or whenever they'll reach driving age in your state). This gives them extra incentive to save and makes them appreciate just how much you have to work to save up for big-ticket purchases.
Of course, you can set your own limits, and it doesn't have to be a dollar-for-dollar match. Many parents will put a cap on how much they'll match -- say, $2,500 or so. You can also offer to pay for the car yourself if your child builds up her savings to a certain level. When I was growing up, a friend's parents agreed to pay for his senior trip if he was able to save $2,000 to take to college with him the next year.
Offering your child an incentive to save helps them make responsible decisions with their money and also teaches them just how much of a commitment it takes to save a large sum of money.
The way I like to teach teens about the value of money is to take the prices of the things they want to buy and convert them to the amount of time it would take them to earn that money. For young kids, pointing out that a toy they want would take three weeks' worth of allowance to pay for can help put costs in perspective. Teens who have part-time jobs can similarly see their purchases in terms of how many hours of work they'd have to put in to earn enough to buy things on their own.
This method doesn't just teach teens about the value of money -- it also gives them tools they'll use throughout their adult lives as they assess the trade-offs of spending money versus saving it for future use, as well as the pros and cons of prospective jobs that pay different amounts. At the teen level, though, this concept is simple enough for kids to grasp, and it will definitely make kids think twice about spending their own hard-earned money.
Every teenager yearns for something she cannot afford -- a car, a laptop, a cellphone, and so on. In my daughter's case, it was a handcrafted surfboard -- a big expense, but surfing is a big deal in our life in Hawaii. One great way to teach the value of money to your teen is to help them save for something special. Setting a savings goal for a dream purchase teaches teens an important life lesson: Big financial dreams can be accomplished if they're broken down into smaller, achievable steps.
Your first step is to help them figure out the amount needed and set a target date. When my daughter realized how long it would take to reach her goal, she bargained with surfboard shapers to get the best deal possible. She also decided to eliminate pricey cosmetic features, because this board was not a fashion accessory to her, but a tool.
The second step is to help your teen work out how much they can realistically save each month. The third lesson come when your teen realizes they need an extra source of income besides mom and dad. My daughter's barely 13, so a real job wasn't in the cards, but she started to sell the bananas, citrus, and avocados in our yard to vendors at a local farmer's market.
Last weekend, my surfer girl let it rip on her new, neon-green surfboard. It was a big life lesson for her. She now knows she's in control of her destiny, financial and otherwise.