Part 3 of 4

It’s never too early or too late to discuss the concept of money and personal finances with your children—but the teenage years are a particularly critical time. Here are four money conversations to have with your teen.

Conversation #1: first teen job

According to John Christianson, author of The Wealth Creator’s Playbook, “Parents often say they don’t want their teens to have a part-time job because school, sports and extracurricular activities are already stressing their kid out, and they fear that letting their kids work will put them at a disadvantage academically compared to kids who don’t. However, work provides a sense of competence and satisfaction that sports and school do not.”

Before your teen gets a job:

• Be there for advice
• Proofread letters, emails and resumes
• Brainstorm potential employers
• Help them with interview preparation

After your teen gets a job:

• Walk them through their first paycheck, noting and explaining things like gross pay, deductions, W-2 Forms, etc.
• Help them find the right bank and set up checking and savings accounts
• Consider helping them start a Roth IRA (perhaps incentivize with a “match”)
• Explain income versus expenses
• Have conversations about bosses and dealing with different personality types in the workplace

Conversation #2: first car

When it’s nearing time for your teen to get his/her first car, start by managing expectations about how the car will be purchased and maintained—and whether you’ll foot the bill or share responsibility. Teens who are required to contribute financially to the car purchase and ownership process are afforded a much clearer sense of responsibility.

Safety is of utmost importance—and the safety conversation must include the financial side of safety, including discussions of what “liability” means and the financial and emotional repercussions that can last a lifetime.

Set long-term goals with your teen such as:

• Target 12 months of driving with no accidents or tickets
• Maintain good academic standing
• Keep your car clean and well maintained

Conversation #3: teen budgeting

Encouraging your teen to get comfortable with budgeting will serve him/her well in the long run. Have conversations about their short- and long-term goals and how they can pursue them financially. Attach a price tag to each goal and talk about where the money will come from in order to fund the goal. Discuss a timeframe for how long it’ll take to reach each goal. Regularly check in on progress and praise your teen when positive movement has been made.

Conversation #4: choosing a college

College is an investment of money and time and the biggest budgeting decision made during your child’s teen years. The decision between a higher cost and lower cost school, or a more prestigious or less prestigious, involves many considerations. This can also be compounded by pressure from family, peers and society.  Frank Bruni, the author of Where You Go Is Not Who You’ll Be, says, “…the nature of a student’s college experience—the work that he or she puts into it, the skills that he or she picks up, the self-examination that’s undertaken, the resourcefulness that’s honed—matters more than the name of the institution attended.” Lean into the discussion. Truly listen to your teen and see each college option through their eyes. Weave in budgetary constraints and the idea that college is an investment. Consider which school shows the most promise for work and life total return. When your agreement, and disagreements, can be navigated in a positive and respectful way, your child will refer to this useful framework through all their financial life.

What’s next

Read about three critical money conversations to have with your younger adult.