Gather Little by Little

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This article is part of the Money Matters for All Ages group writing project being conducted by the M-Network and other blogging friends. See the bottom of this article for the full list of participants and links to their articles. Please check back daily as I will update the links as new articles are posted! Also, if you are blogger and would like to join into the discussion, feel free!

I recently became the father of a teenage boy. I never thought it would happen. I kept telling myself teen years were a long way away, yet he continued to grow, continued to mature, and then suddenly he was 13. This event of course made be begin to think of things I had pushed back into the corner of my mind. Things like driving, high school, a job, and girls. It also dawned on me, that while we’ve taught him about money, taught him the value of saving, tithing and keeping track of his money, I had not yet taught all of the basics of adult money management. Talking to other parents and friends of ours, I started realizing this was a trend and it wasn’t just me. I was fortunate enough to have a fifth grade teacher who taught us all about money, the banking system, interest, loans, etc. My son hasn’t had the same opportunity. In thinking through this some, I thought I would share with you a few of the more basic, but critical items we need to teach our teenagers about finances:

Set up a checking and savings account

Most likely, your teenager probably already has a savings account. If not, you should set one up. I have one for each of my children at ING Direct. We’ll be setting up a checking account for our teenage son soon. While his only source of income at this point is allowance, various odd jobs he does for us and our neighbors, and gifts, I feel it will be valuable for him to start learning the basics of a checking account. This includes the use of checks, how to properly fill them out along with how to use a debit card. He has enough money now where placing his money in a free checking account (instead of the jar) would be safer anyway.

After creating the checking account, spend some time with your teenager doing the following:

• Show them how to properly fill out a check and record the amount in the register.
• Tell them how a debit card works and how to use it at the ATM to pull cash when needed.
• Explain that if they use an ATM from another bank their may be a fee.
• Help them sign-up for online banking and show them how to use it. Make sure they know to keep their credentials private and to use good passwords!
• Stress the importance of saving, and show them how to set-up automatic transfers from their checking to savings accounts and make their saving automatic

These are all things we as adults take for granted, but your teen may not know. Make yourself available to answer questions and walk them through anything they may not understand and have questions about. If you don’t know the answer, it’s a great time to introduce them to the bank’s customer service number. Call and get the answer together or visit a branch together.

Help them set-up a budget

Setting up and managing a budget is probably something that won’t be fully necessary until they begin receiving a steady stream of income from a job. But even before they have a job, you can set up a mini-budget. Help them determine a % of their money they will save, a % they will tithe or give to charity, and a % they can spend. This will start good habits early.

Once they have a job and a steady stream of income, help them set-up a monthly budget. I would suggest doing something simple on paper until they grasp the concept, then moving over to something more sophisticated like a spreadsheet, You Need A Budget, Mvelopes Personal 3.5, or Quicken. Are these tools overkill? Maybe, but getting your teen familiar and in the habit of using these types tools certainly won’t hurt. Plus teens like using the computer and technology.

Manging a budget will be a key tool for not only teaching them how to control and track their spending, but it will be an insightful tool in teaching them the true cost of things. For example, before I got my first car, I thought all you had to do was buy it and drive it. I quickly learned that their were other costs such as: gas, insurance, registration, inspections, oil changes, repairs, routine maintenance, etc. The point here is budgeting will help them think through all of the costs associated with the things they want or have. Things often cost more than they seem at first.

Help find them a job

I started working when I was 15 and have worked every since. I think it is extremely valuable for teenagers to have jobs as soon as they can begin working. It teaches so many valuable lessons and keeps them busy and out of trouble. Idle hands are the devil’s tools – I see far too many idle hands in teenagers these days. Having a job early has the following benefits:

• Generates their first source of consistent income
• Teaches them how to work with others and for others
• The basics of income, taxes, social security, etc.
• Teaches them time management – With school, friends, and a job they will need to manage their time. This is something that will be a valuable tool for their future.
• Teaches responsibility and accountability

I worked weekends initially. When I turned 16 started working 3-4 hours in the evenings after school. When I started college, I moved up to working 30 hours or so until I graduated. While it was tough sometimes, I wouldn’t go back and change it. It built character, responsibility and established critical social skills I don’t think I would have gotten any other way.

Who’s paying for what?

Now that the accounts are set-up, the basic budget is in place, and they are making money, it’s time to start talking about who is going to pay for what. Things to consider:

• Who is paying their car insurance? By the way, put them on your policy, it’s far less expensive than creating a policy of their own
• Who is paying for gas, oil changes, car maintenance issues?
• Are you getting them a car? If so, is it a gift or do they have to pay you back?
• Who is paying for college? Depending on your answer here, should have significant impact on how much of their income they should be saving
• Will you continue to buy their clothes?

These are just a few things you will need to consider and discuss with your teen. On one hand, you certainly don’t want to overwhelm them with all the various costs of life, especially if their salary isn’t much. On the other hand they need to begin learning the cost of things. There is not right or wrong answer here, but these are things you should think through and tackle.

Final Thoughts

These are just a few of the more critical financial related things you need to talk to your teenager about. Teen years are critical for preparing your child to become an adult and to be able to live on their own. It’s time to start breaking down that insulation you’ve had around them for so long and begin exposing them to the realities of life. Make it a gradual process, removing the insulation a little at a time as they get older. While they may not like it, they will thank you for it later.

Teen years are also a critical time for instilling good financial habits. If you instill good habits in them now, they will continue these habits into their adult lives. Don’t miss this critically important time. Teach them what you know, discuss the mistakes you’ve made and the negative impact they’ve had on your life so they can learn.

Proverbs 22:6 – “Train a child in the way he should go, and when he is old he will not turn from it.”

What are your thoughts? What things do you think are critical to teach teens about finances? Do you have teens? If so, how are you handling this topic? Add a comment!

Here’s are the other articles in the Money Matters for All Ages series:

• January 15 – Introduction at My Dollar Plan
• January 16 – Preschoolers at I’ve Paid for This Twice Already
• January 17 – Personal Finance for Children and Pre-Teens at Being Frugal
• January 18 – Teenagers right here at Gather Little by Little AND Money Advice to My Teenage Son at DebtFREE-Revolution
• January 19 – College Money Matters at Mrs. Micah
• January 20 – Financal Advice For Your Twenties at Remodeling This Life and Money Tips for the twenty something crowd at Cash Money Life
• January 21 – Money Matters for All Ages – The Chaotic Thirties at Moolanomy and Personal Finance Advice For Your 30’s. at My Two Dollars
• January 22 – The Forty Year Olds’ Wakeup Call at Credit Withdrawal
• January 23 – You’re in Your 50s – Wake Up and Start Saving at Millionaire Money Habits and Retirement Objectives in your 50’s at Credit Withdrawal
• January 24 – Easing into the Golden Years- the 60’s and Beyond at Chance Favors
• January 25 – 4% Withdrawal Rule for Retirement at Quest For Four Pillars and retirement in the UK at Plonkee Money
• January 26 – Money Matters for All Ages: The Complete Guide at My Dollar Plan