How to Talk to Your Teenage Children About Sound Financial Practices

by | Jul 18, 2023

As a parent, you want your children to grow up to be financially responsible and independent adults. But how do you teach them the skills and habits they need to achieve this goal? How do you talk to them about money matters without boring them or making them feel overwhelmed?

The answer is not simple, but it is possible. Here are some tips on how to have meaningful and engaging conversations with your teenage children about sound financial practices.

1. Start early and be consistent.

Teaching teenagers about financial literacy should start at home with open communication. It doesn’t have to be a structured conversation, either. Use teachable moments that come up every day to talk to your children about money and finances. For example, you can explain why you are saving for a vacation, how you compare prices before buying something, or what interest rates mean when you use a credit card.

Be consistent in your messages and actions. Show your children that you follow a budget, save for emergencies, pay your bills on time, and avoid unnecessary debt. This way, they will learn from your example and see the benefits of sound financial practices.

2. Make it relevant and fun.

One of the challenges of talking to teens about money is keeping their attention and interest. To overcome this, try to make the topics relevant to their lives and goals. For example, if your teenager wants to buy a car, use that as an opportunity to discuss saving strategies, insurance costs, maintenance expenses, and loan options.

You can also make learning about money fun by using games, apps, quizzes, videos, or podcasts that teach financial concepts in an entertaining way. You may also involve your teenager in family financial decisions or projects such as planning a trip or renovating a room.

3. Encourage questions and feedback.

Another way to make talking to teenagers about money more effective is to encourage questions and feedback. Don’t assume they know everything or nothing about finances. Ask them what they think or feel about certain topics such as debt, investing, or taxes. Listen attentively and respectfully to their opinions and concerns.

If they ask you something that you don’t know the answer to or are unsure about how to best explain it, don’t be afraid to admit it. Instead, say something like “That’s a good question. Let’s find out together.” Then, do some research online, consult a book, or ask an expert together. This will show your teenager that learning about money is an ongoing process that requires curiosity, humility, and collaboration.

4. Teach them how to use credit wisely.

One of the most important financial lessons that teenagers need to learn is how to responsibly use credit and build a positive credit history. After all, helping your teenager learn this skill may help them access better opportunities in education, housing, and future employment. However, many teenagers lack knowledge in regard to credit cards and loans and may fall into traps such as overspending, high-interest rates, and late fees.

To prevent this, teach them how credit works, and the benefits and risks involved. Explain the difference between debit cards and credit cards, and how interest calculated is compounded. (For more on debit cards vs credit cards, see this other blog I wrote. Credit Card vs Debit Card

Show them examples of monthly statements and point out any fees or charges that they may incur if the balance were not paid in full. Help them understand the importance of paying in full and avoiding making only the minimum payments.

Start with a teen-friendly credit card with a low spending limit (co-signer required). Monitor their activity regularly and give feedback (praise or suggestions for improvement where merited). Set rules and boundaries such as spending limits, repayment deadlines, and discuss in advance any consequences of breaking them.

5. Help them set goals and plan ahead.

Finally, help your teenager set achievable financial goals and teach them how to plan ahead to achieve those goals. For example, if they want to go to college, help them research costs, scholarships, grants, and loans that may be available. Assist them in creating a savings plan to cover expenses. If they want to start a business, help them write a business plan to estimate revenues and costs, as well as any possible risks involved.

Helping your teenager set financial goals may help them develop skills such as budget forecasting, problem-solving, and financial decision-making. It may also help boost their confidence, motivation, and self-reliance.

Talking to teenage children about financial practices may seem daunting at first, but it is worth the effort in the long run. By following these tips, you can have positive productive conversations with your teenager to prepare for future success.