3 Money Skills to Teach Your Teen

Set your older child up for success with these important lessons.

Though a child's teenage years are often wrought with turbulence, they're also a turning point. After all, teenagers are at an age when they're finally able to take on certain responsibilities, such as caring for themselves without an adult present or getting a job and earning money rather than depending on their folks for an allowance. 

Now, as most parents will tell you, getting a teenager to listen and take you seriously is easier said than done. As such, you may need to pick your battles when attempting to impart wisdom to an older child. But if you're going to make the effort, it really pays to set your teen up for financial success, and you can do so by focusing on these key money skills. 

1. Budgeting

Budgeting is one of the most effective financial tools out there, and it's really simple to do. If you teach your teens to budget money carefully, they will be less likely to land in debt as young adults -- and suffer the repercussions involved. 

Granted, it's not that easy to teach teenagers to budget when they only have a handful of expenses to bear, such as a cell phone (assuming you don't pay for it) or leisure spending. But what you can do is let your teen in on your budget -- the one that covers everything from your mortgage payment to your auto loan to the food you put on the table. That way, your children will get a sense of what budgeting is truly like so that when they move out or go off to college, it'll come naturally. 

2. Saving 

If saving money were an easy thing to do, more people would do it. But saving money takes discipline, and that's something a teenager may not have at first. 

That's where you come in. Review the importance of having a healthy savings account with your children and explain how it could come in handy at various points in life. Whether it's the spring break trip your teens will want to take or the home they'll eventually want to buy, understanding that savings make these things possible means your child is more likely to take the idea seriously. 

But don't just talk up the importance of saving money -- show your teen how to make it happen. Discuss the art of setting priorities, and explain how the process of automating savings can help your child stay on target. 

3. Investing

You're no doubt aware that investing money is a good way to grow a smaller sum into a larger one. And it's important that you share that with your teens so that they can start putting their money to work. 

If your teens earn money from a job, encourage them to open IRAs, which is generally an option as long as your teen is 18. If your children are younger, you'll need to open custodial IRAs on their behalf. From there, you can walk your teens through their investment choices in that account and explain the various benefits, drawbacks, and risks associated with each one. Stocks, for example, can be volatile, but they offer higher returns. Bonds are safer, but offer lower returns, generally speaking. 

Another option is to open a brokerage account for your teens if they don't earn an income. With a custodial account, your child owns that money, not you, and you can use it to teach your teen to invest just as you would with an IRA. The benefit of opening a brokerage account is that your child will then have the option to use that money as an adult. With an IRA, that money is off limits until age 59 1/2. 

Getting through to a teenager is no easy feat, but it's worth making the effort to discuss these important financial skills. If you succeed, you'll be setting your child up for a lifetime of success.