Teaching kids how to handle their money is huge. So huge, it should really get a dedicated class at school. Sadly, in most cases, this just isn’t the reality. I don’t remember anything about money management or budgeting from my school years; maybe a lesson or two, but nothing comprehensive. And it really should be comprehensive! There are so many ways to mishandle money, many of which actively target young people and college kids (looking at you, credit card companies!) So the younger we can teach our kids, the better off they will be, and the better their chances are, of avoiding some of these major missteps!

By twelve or thirteen, a kid has largely figured out what the socio-economic situation is in their household. They recognize if they have more or less material things, or go on more or fewer vacations than their friends. They have watched you pay for things with cash, checks, or plastic cards. They have watched you withdraw cash from an ATM. They may have been told “we can’t afford that” or they may have never heard those words. They have also probably listened to financial discussions between their parents. For the most part, we as parents set the stage for teaching our kids about money, just by our relationship with it.

1. Talk about it!

As with most things in their lives, our kids learn most of what they know of money from us. So an important first step is to discuss it! There’s no need to get into the grizzly details of your finances (unless you want to). To start, you may want to only discuss your overall financial values and strategies with them. General discussions can be about your expenses and what allotments of income are needed and where. You can discuss how many more car payments you have left, and how much your various interest rates are. If something might confuse them, make sure they understand why you are doing things a particular way. If you pay with credit cards, explain why: you are accruing airline miles, convenience, they are safer than cash, etc… If you are currently paying off debt, explain how and why.  Teach them the advantages of running your home using only cash. Whatever your financial situation and the story behind it, sharing it with your teens is an important aspect of how to teach your teens about money.

2. Log expenses

This is a really easy way to get your teen’s attention. Have everyone in the house track their expenses in one place. You can be fancy with a spreadsheet, or simple with a notebook! We have used a whiteboard before, and I decided to hang it by the door so it was impossible to miss. And then just log it all! You can leave off the big stuff like the mortgage and car notes, but be sure to track things like gas, groceries, meals on the go, and morning coffee. That way, your teen has eyes on what it costs to run the house.

3. Identify wants and needs

This is a big one. That morning coffee run, the nail salon, take-out on a busy weeknight, all the little luxuries that we like to treat ourselves with can really add up. And if our kids see us do these things regularly, they may not realize that they are extras, and believe instead that it’s just something we do. Take your tracked expense log and talk about the times you purchased in a week. Identify what you consider the “extras” and add up how much they cost that week. Then discuss whether that money could have been better used elsewhere, or saved for a big-ticket, wishlist item. Keep in mind, this is not to judge or shame any spending habits! Just to give some insight to your teen about how much things cost, and how much change can be affected by small adjustments.

4. Saving and long term goals

Once the clarification has been made in your teen’s eyes that some purchases are out of necessity, and others are not, then you can really start the conversation about saving. Just like small purchases can add up to quite a lot, small savings can make a big impact over time. That five dollar coffee every morning on the way to work, can be $100 in a savings account at the end of the month. A savings account is a great idea for this age. And at sixteen, kids can get their own checking account. Our daughter has a savings account linked to her checking account, and she manages these on our bank’s app. Her accounts are linked to mine because she is under eighteen, so I can monitor her activity.

5. Earning money

It’s never too early to impart the importance of saving the money your teen earns. If your kids get an allowance from a young age, have them start saving! If they’re too young for an account, they can save money in yours, or in a fun place like a piggy bank or home safe. As they get older, talk about big-ticket items they want to save for, like a vehicle or college expenses, and help them make that savings plan. If it’s financially feasible for your family to do so, look into matching them to incentivize their saving.

6. Let’s talk about debt

I know. It’s a dirty word in some houses. But it’s also a hard fact of life for many families, and something your teen will have to navigate for themselves eventually. Talk about major expenses like cars, college, housing, and vacations. Talk about ways to avoid credit card debt, like paying off a balance every month and the difference between regular and introductory interest rates. Talk about student loans versus college saving accounts and what is possible for your teen. The more educated they are, the better, and the more confidant they will be when their time comes to make these big decisions.

7. Let them take some responsibility

This part can be difficult, especially if money is not tight for your household, but the sooner a teen has some small fiscal responsibilities, the better equipped they will be for larger ones later on. This can start as small as tithing or donating a portion of their allowance to a cause, and be as major as paying for their own gas and maintenance on their car. The more ownership they have of their money, the more selective they will be about how they spend it. Sit down and decide together the best cause for your teen to give to. He can tithe to your local church, donate money or time to a nearby homeless shelter, or buy supplies for animal shelters in the area. Our family supports a nonprofit that takes in homeless mothers in Kenya and teaches them a trade so they can support their families. There are even ministries that collect money to pay off medical debt for people all over the country!

8. Teach them how to read a pay stub

When your teen earns his first paycheck, break it down with him so he can see how much he actually earned. Show him the difference between his gross and net earnings. Maybe compare with one of yours to show how much is taken out for taxes, retirement, insurances, etc., and discuss these things.

9. Talk about investing

No, it’s not too early to talk about investing or saving for retirement!  This is especially important if you yourself got a late start on this (like me!). Don’t let your teen start late.  Talk about it now. Be sure to explain compound interest – how money can earn interest over time and that it is best to start young. This is especially relevant for saving for college!

10. Model contentment

I think a big problem with saving money these days is that everyone seems to want to keep up with the images and illusions of success that we see all over social media. It’s really important to model being content with what we have, and grateful for our many blessings.  As difficult as it can be at times, avoid comparing your life to someone else’s. Don’t feel overwhelmed if you didn’t start off your adult life well with managing your money, just set a good example and get help with your finances now if you need it. That example is so impactful to our kids!

Books about budgeting

Smart Money Smart Kids by Dave Ramsey and Rachel Cruze

Dave Ramsey, the debt eliminating guru teams up with his daughter to break down money principles and lay firm foundations for kids smart money habits.

Make Your Kid a Money Genius by Beth Kobliner

I definitely did not start out in life with a thorough understanding in this area! But that doesn’t mean my kids have to repeat my mistakes! This book teaches you to equip your kids to navigate their financial future with confidence.

The Simple Path to Wealth by JL Collins

This book was instrumental in helping straighten out the finances in my family!

Apps and websites

There are tons of apps for tracking spending and tips for saving. Literally, anything you could want and too many to list, but we use Every Dollar by Dave Ramsey.

The mint has lessons and information about financial responsibility for kids, teens, and parents.

Jumpstart has “reality check” exercises that will tell them how much money they need to earn for their desired spending.

Homey is a free app (with in-app purchases) that assigns chores to family members and keeps track of allowance or other rewards earned.

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