No matter how good you are, at some point your kids are gonna have to create their own independence and think that Mom and Dad aren’t cool, just to establish themselves.
That’s what adolescence is about. They’re gonna go through that no matter what. – Eddie Vedder
What is a good birthday present for a boy turning 16? This is the dilemma that faced my wife and I earlier this week as our younger son hit the magical number. His choice of a good gift would be airline tickets to someplace exotic, a car for the license he plans on getting, or an Xbox.
While 16 is a milestone, there was no way he was going to get any of those items. Then a light bulb went off and I had the idea of signing him up for a couple of personal finance courses so that he could start learning how to be responsible with money.
Okay, so I am not that cruel. Ultimately, we got him a card and instead of putting in some cash, we decided to prank him and gave him stickers fit for a 5-year-old.
Everyone at the table thought it was funny except the birthday boy who thought that it was just another in a long line of weird things his parents did! Oh, to be 16. We ended up taking the easy way out and gave him some cash.
I have plenty of criticism regarding the Israeli education system, but one course that I think could really be beneficial would be a mandatory personal finance course. Our older son had one in 10th grade, and it was amazing.
I applaud his school for making it mandatory. They learned all the basics about bank accounts, how credit cards work and the dangers inherent to them, the need to budget and be responsible with money.
The fact is that this course will serve him more in life than practically everything else he learned in high school.
Unfortunately, that was an outlier, none of our other kids had the fortune.
I’ve mentioned to all our kids that maybe they can watch my YouTube videos on personal finance and investing, and they can learn the information that way. The question is always met with a laugh and a “no way.” No need to explain how embarrassing for them that would be!
Education
Teenagers need to learn responsible money habits. Just like most things in life, if kids learn the ‘right’ lessons they will have a much easier time being financially responsible.
If they see bad money habits in the home and never are taught or shown how to properly deal with money, then chances are that they will make costly financial decisions when they get older.
One of the issues that I struggle with is what to buy for older kids and what to make them buy with their own money. On the one hand they are still at home and dependent on you for most things financially.
On the other hand, they have worked and now actually have their own money and if they ‘need’ something, why shouldn’t they buy it themselves. Funny things happen when that is suggested. Often the ‘need’ is no longer so important.
I think actually that helping teens understand the difference between and ‘need’ and a ‘want’ is paramount. How many adults confuse the two terms. Well, if kids are encouraged to be able to differentiate between the two, then a lot of financial stress will be avoided in adulthood.
Learn how to save
It’s important to teach your kids the importance of saving. Even in Israel, where no interest is paid, I think that teens should have a bank account.
If you can open an account abroad for them, they can actually earn interest, even on money market accounts and can start learning about investing as well.
Learning how compound interest works and how they can continue lying on the couch playing on their phones and actually earn money, can be a big motivator to get them to earn and save more and more. It’s the ultimate lesson in passive income.
Help with weekly budget
Years ago I met with a family who had a unique idea of teaching their kids how to budget. They would give their teenagers a certain amount of money (then it was around NIS 500) and put them in charge of weekly food shopping.
They would have to decide among themselves what the family needed and then figure out how much it cost.
Needless to say the first few weeks they had a lot of Fruity Pebbles and ice cream, and they never had enough money left for all the basics. Then they figured it out and started shopping more wisely and started getting their fruit intake from more natural sources.
If you have good tips to teach teens smart money habits, feel free to email me.
Happy 16th YK!
The information contained in this article reflects the opinion of the author and not necessarily the opinion of Portfolio Resources Group, Inc. or its affiliates.
Aaron Katsman is the author of Retirement GPS: How to Navigate Your Way to A Secure Financial Future with Global Investing. www.gpsinvestor.com; aaron@lighthousecapital.co.il