Discussing Finances with Your Teenage Kids.

How can you possibly teach your kids about money? You know its a necessary evil, but often parents are intimidated by a lack of knowledge themselves or they feel their teenage children aren't ready to understand complex topics like basic money management. Even worse, they're afraid of giving their kids a credit card for fear of them running up a large debt that the parent can not pay. I say bologna (actually I said something else but its not appropriate here)!

The problem with teenagers is that they know nothing but think they know everything. Right? The following line is from my Father in which I've borrowed to illustrate a point:

You do, and say, and preach, and punish, and what does it get me? More of a shiny bald head.

I have no kids of my own yet, but I can now understand the grief I put him through. One of the best lessons my parents ever taught me was basic money management. They did this by throwing me into the deep end of the proverbial swimming pool, but they did this with a life jacket. What life jacket you ask? Their own personal time and teaching me right from wrong.

In my Christmas stocking at age 15, I got one of the coolest gifts ever. My own checking account! Later that day we had quick session in money management regarding financial responsibility and basic accounting. My only requirement was, I had to spend 15 minutes (or more) with one of my parents each weekend to review my weeks purchases. The account was funded with the small sum of $200 (which I thought was a million bucks) for smaller purchases like gas, school lunches, Saturday night dates, etc.

This went on for 2 and 1/2 years until I went to college where my parents cut me loose from looking over my shoulder. Not once did they have to bail me out of a problem or a bounced check. Granted I was a pretty smart kid, but I had no real concept of money management.

Today, as I'm listening to a colleague complain about his teenage daughter blowing $200 on a pair of jeans, I flashbacked to this story and thought I would share this with the world along with a few updated for those parents out there struggling with this issue. Alternatively, if you are a teenager looking to get out of the doghouse needing a quick way to impress your parents, print this out and say "Mom/Dad, I need to be more responsible and lets try this experiment. Will you help me?"

Try these tips in order, and I'm fairly certain both parents and teenagers will learn something:

1. Get their attention! Best way to teach a teenager anything is by letting them do whatever you're trying to teach them. Consider getting your teenager a pre-paid debit card or a real life active checking account. You could use a credit card but set the limit very low around $100 to $200.
2. Go over the math basics of the account. Give a real life example like this:
   
   $10 for lunch at the food court
   $25 for a new t-shirt on sale at The Gap
   $15 for their movie date and popcorn
   
   Explain that since he/she spent a total of $50 when your teen only had $100 on the pre-paid debit card. So they have to make your remaining $50 last until their next pay day (which is really an allowance).
3. See how they make this work. If they stick to it, great job of parenting! However, keep looking over their shoulder. If they run out of funds, sit down and go over how they ran out of funds. If it was an honest mistake, a one time thing or you forgot to transfer their allowance, you should look over it and detect what went wrong. Explain
   and explain it all over again until the accounting problems are remedied.
4. Follow up each week and keep track of their expenses online. With our banking system today, you can monitor each transaction within minutes of their purchase. You can even get email alerts with some banks.
5. Reward their progress if its deserved. Money management is a great tool for a young adult to have, so continually push your teenager(s) to learn new and different types of finance related topics every month or so. Email them an article from your favorite financial planning website to get them interested or at least speed up their learning curve.

I hope this helps you as it helped me. Give it a shot, and see what plays out. A couple extra tips on how to get this started:

1. Your local bank should be able to set you up with a free debit card and will automatically transfer funds into your teenager's account on the dates and quantity of funds you require. Take advantage of their free services and also familarize yourself with the banks electronic banking system.
   
2. Keep the debit or credit account at a very low balance. Teenagers often misplace things or can be convinced to do "less intelligent" things, so keep a low balance as an added insurance policy.

As you can see, I am a huge proponent of learning from your own mistakes and becoming a mentor to younger people. The old adage of "Give a man a fish, you fed him for a day; Teach him to fish, you have fed him for life." Same principle applies to all things, so give this a try and see how it works for you and your teenager(s).

I do ask one small favor: If you implement this experiment, please let me know how it works out for you. Remember, this takes work from you and your teenager(s) so unless you're willing to put forth the effort, its a bad idea to attempt this experiment.

Good luck!