(Part two of a two-part series)
Remember what it was like to be a teen?
You wanted to spend all your time with your friends. You had a job, and you felt like you had an endless supply of money to do what you wanted, go where you wanted, and buy what you wanted. You didn’t think about things like mortgages, bills, investing, 401ks, or your future. That was for later — and that’s when you’d think about it.
If this sounds like your experience, you probably had to figure out money management and investment basics on your own. And that’s something you don’t want your kids to go through.
Here’s the good news: you’re not on your own when it comes to talking to your kids about money and investments. You can’t stop your kids from becoming teens — if they’re not already — but you can give them sensible money advice and instill habits they will use for a lifetime, and we’re here to help.
Here are a few thoughts from your local financial advisors on how to teach your teens sound financial management principles.
Talk to Them
Getting started is as simple as that! Have meaningful conversations with your teens about money. Teach them money management basics: concepts like pay yourself first, identify your expenses, and live within your budget — if you don’t have it, don’t spend it. If you are comfortable with it, consider opening up about you and your partner’s financial situation; tell them about the success and mistakes you have made, and the lessons you have learned from both.
Set an Example
Don’t just talk to your teens about general concepts; tell them how you save, budget, and spend money. The best way to teach is by example — and like anything else in life, consistency and discipline are key. If you are married, you and your spouse must be on the same page when it comes to spending, and you must both send the same messages to your kids.
It’s Always About the Budget
If you are budget conscious, your teens probably will be too. Teach your teens what it costs to run a household and how to live within a budget. Make it real. For example, make a menu plan for the week with the family food budget as the guide, and have your teen do the grocery shopping. What a powerful lesson on how much it really costs to feed a family.
Make Sure Teens Have Skin in the Game
As a parent, you are responsible for providing your kids with food, shelter, and clothing. That’s it. Everything else is optional. This includes a cell phone, a car, movie tickets, vacations, and so on. Based on your finances and circumstances, you decide what else you want to provide. It’s smart to require teenagers to earn at least some of the extras. As kids pay for things themselves, they feel a sense of responsibility and learn to appreciate what they have.
Help Them Invest in Their Future
Teenage years are the perfect time to talk about the value of investing for the long term. A simple concept like compound interest is something teens can learn and understand. Start by setting up both a checking and investment account for your teenagers. This helps your teen invest in his or her own wealth for the future.
One idea for teens is to match any money they earn with a Roth contribution from you to their Roth account. This incentivizes teens to work hard and gives them experience with investing and compound interest early.
If you haven’t spoken to your teen about investing and the long-term benefits that come with it, start today. At True North Wealth, we can help you get your teens off on the right foot. Call us today at 801-316-8175 to set up a no-cost consultation with a fee-based financial advisor in Salt Lake City and surrounding Utah regions.