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Teens and Money: How to Navigate Money Matters among Friends

My older daughter’s classmate invited friends to fly on a private jet for Mick Jagger’s performance at the Super Bowl. My younger daughter’s classmate declined a movie outing because her mom didn’t get paid until the following week. These examples of financial differences occupy both ends of the economic spectrum. But each scenario raised complicated feelings and questions for my teens.

Your teenager can probably discern which friends live in the fanciest houses or tote the most expensive bags. Yet they may not understand how money—or lack of it—can complicate relationships. Teens confronting “friendship economics” for the first time may have no clue how to handle those situations, says Dr. Mary Gresham, a financial psychologist based in Atlanta.

“They get embarrassed in both directions—the highly affluent teens with more money than their peer group, the less affluent teens who have less money than their peer group,” Gresham says. “They’re all embarrassed and ashamed of what they do and don’t have.”

5 Strategies to Help Your Teen Navigate Money:

1. Teach dollars and sense.

What is your family’s money attitude? Instill your values and attitudes about money in your teens “so they don’t equate self worth with net worth,” advises Neale Godfrey, author and chair of the Children’s Financial Network.

When teens desperately want to blend in, remind them that each family’s economic situation is distinct, adds author Beth Kobliner, personal finance commentator and journalist.

“You can explain, ‘That’s not how our family chooses to spend our money.’ And then talk about what your family does value, like spending time together watching movies over the weekend,” Kobliner says.

2. Give them words.

If your teen has an affluent friend, give them vocabulary to gracefully decline an event that might break the bank. “I’d rather do something else,” or “That’s not how I want to spend my allowance.” Both acceptable and truthful ways to avoid overly expensive outings, suggests Gresham.

If talking about money becomes too awkward, your teenager can say, “I don’t feel comfortable discussing this,” advises Variny Yim, regional director for Jump$tart Coalition for Personal Financial Literacy. “It’s teaching your kids that they have a choice in the matter.”

3. Offer alternatives.

Fun doesn’t need to cost a fortune. When a friend with money proposes another expensive night at the movies, your teenager with more modest means can suggest a Netflix marathon complete with homemade popcorn. Restaurant lunches too pricey? Try a picnic in the park.

On the flipside, parents whose teens take costly outings for granted should coach their kids to be sensitive and flexible, Kobliner says. Help them think of what to do with friends without money.

“It’s important to have discussions with your kids about respecting what their friends can afford. To be sensitive, there are times when your teenager may need to opt for less-expensive activities,” she says.

4. Be thoughtful.

If your teenager generously wants to foot the bill for a less fortunate friend, acknowledge their kindness. But then offer to help negotiate what may be a sticky situation, suggests Kobliner.

“If it’s an activity that is expensive and you, as parents, want to help out your child’s friend, make sure to do so in a low-key way that gets the friend’s parents’ sign-off,” she says. “Otherwise your kind gesture might be misinterpreted as being pushy—or worse, insulting.”

5. Practice courage-building exercises.

Help your teenagers prepare for uncomfortable money moments. “This is a skill they have to learn; this is a muscle they must work,” Yim says. “Awkward money situations are going to arise. The goal is to give your kids the courage, the words, and the ability not to beat themselves up for something they have no control over. That’s the bigger life lesson.”

Mary Helen Berg

Mary Helen Berg is a freelance writer based in Los Angeles. Her work has appeared in Newsweek, The Los Angeles Times, Scary Mommy, and many other publications.