Children and Money: Teens and Young Adults

Jessica Lanning

As my kids get older and I talk to more parents and read more about money management and children, I’ve learned some helpful tips when it comes to older kids. Remember, as I’ve stated in my other blogs in this series, the idea is to give them lots of opportunities to screw up when the stakes are low so that when the stakes are higher, they are far less likely to repeat the mistake.

Without lamenting about how “kids these days” seem to do less than my generation, I encourage parents to get kids more involved with money as they get older. Some ideas:

Banking

  • Open a bank account for them by the age of 10. This account should not grow to have more than a few thousand dollars in it. You don’t want too much money in their hands if you should die when they’re young, and you don’t want it interfering with college grants and loans.
  • Open a checking account for them by the age of 16. It should have a debit card attached to it. They should understand how to balance it. Before long we will be a checkless society, so this exercise may be less necessary. But at least make sure they understand how to find their balances and see their spending. Using an online tool or app that tracks spending might be worth exploring as well.
  • Consider letting your kids do the household banking. Let them pay the bills or enter the data into Quicken/QuickBooks and run the reports.
  • At some point, kids should have a credit card. It might have to be secured, but that’s okay. Keep the limit low. Let them use it and pay it off every month (or not). It’ll build credit history, it’ll teach the cost of borrowing, and teach them how to pay bills on time.

Investments

  • Consider buying your kids stock, even just a few shares, and take them to a shareholder’s meeting. Google would be an interesting choice, or it can be any company they’ve heard of or whose products they use.
  • Once they get a job, consider opening a Roth IRA for them. They can put in half, and the Bank of Mom and Dad can put in half.

The working world

  • Kids should work during the summer for money, but preferably not in the family business. Paychecks should be directly deposited into the checking account.
  • Let them do their own tax return when they get that first job.
  • Do a cash-flow plan before they leave the house for college or their first job. Let them learn the costs of living outside the home before they leave home.
  • If you’re worried about “boomerang” children — those who leave home but then return in their mid-20s to live with Mom and Dad again — make it clear that you intend to charge rent and you expect them to work or be actively pursuing work. Do not let your kids stay home for free.

Schools today do not teach money management. That has fallen to parents. Get the basics in your children’s hands before the stakes are big and the consequences serious. Remember that compassion and lightheartedness go a long way, while lectures never do. Let the consequences do all the teaching and enjoy the unexpected rewards of financially savvy kids.

What works for you? Let me know and I’ll include your tips in a future blog.

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