Teaching your teenager basic principles of personal finance is really important … and, at times, really hard. So, let’s start at ground zero.
3 Tips for Personal Finance For Teens
1. Acknowledge that your teen thinks you don’t know anything.
“When I was a boy of fourteen, my father was so ignorant I could hardly stand to have the old man around. But, when I was twenty-one, I was astonished by how much he had learned in seven years.” Mark Twain
Most children, for some period during their teenage years, are reluctant to take advice from their parents. That is a natural part of the growing up and out process.
My four children were no different. When I tried to initiate conversations about how I made money (in those years that I did), they were, at best, polite. But, these infrequent flashes of curiosity ended as quickly as they sparked.
So, I decided on a new tact: asking friends with business expertise to speak to my kids instead. That’s right; I set up little engagements with contractors, bankers and money managers … and, my kids. They ran something like:
ME: “So, Bill (contractor), since we are sitting here anyway, I wonder if you would be willing to tell my kids how you make money building houses and stuff.”
HIM: “Jim, I thought that’s why you asked me over … OOPS … I mean I would be glad to.”
And Bill would explain how he bought materials, hired subcontractors, negotiated with landowners, borrowed money and so on. And, my kids responded with interest and good questions for Bill, as well as for my friend the banker and my friend the money manager.
Teenagers are interested in money. They know that they need it and want it. Since they will, at times, pull away from parental guidance, bring in your friends. And, you can do the same for your friends’ children.
2. Turn the abstract into the specific.
Kids get enough schooling in school. To get through to them, drop the lecture and deal in specific, relevant examples of personal finance.
One year, I sat all my kids down and explained that I was about to enter a real estate deal. I offered each of them a very small partnership interest, and I told them that they needed to understand the deal so that if something happened to me, they would know what to do.
Their first inquiry (of course) was the amount of how much they were going to make. I explained that this answer depended on several factors. They wanted to know more about these “several factors.” No longer was my talk just, “blah, blah, blah.” They now had a self-interest, and they paid attention to my responses.
The hour-long discussion that followed was one of the most productive I ever had with my kids. We covered mortgages, contracts, lawsuits, partnership agreements and a couple of other topics. I think they enjoyed it; I know I did. And, what’s more, I think they walked away from our get-together with a slightly better understanding of some basic financial principles.
There are a lot of ways to turn an abstract point into a specific example. If you want to get through to your teenager, look for these opportunities.
3. Educate yourself.
When I started writing about and teaching principles of personal finance, I realized that there were many concepts I thought I understood … but, really didn’t. There is no better way to find out if you understand something than by trying to teach it.
For me, I never really understood mutual funds as well as I should have. So, before speaking to my kids about these investments, I spent an hour and learned all that I could. While I am still no expert, I knew more than they did and could handle most of their questions adequately.
Fortunately, I have a friend who is a stockbroker, and he gave them a much better explanation at a neighborhood barbecue. And, more importantly, I told them that I was giving them each $100 to invest in the mutual fund of their choice, and the kid whose fund had the highest value at the end of the year would get an extra $100. In other words, try everything!