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How to Teach Teenagers Financial Responsibility

We, as good parents, all want our kids to grow to be successful, independent and happy adults.

An alarmingly large challenge to this these days is the prevalent lack of financial accomplishment in the world around us, which begins with financial literacy and travels through financial responsibility. Combined with the phenomena of teenage, the two sometimes make mud.

Never fear, however. There are some strategies we can employ to nudge them along the right path even if they are reluctant to acknowledge our intelligence or existence as parents.

“When I was a boy of 14, my father was so ignorant I could hardly stand to have the old man around. But when I got to be 21, I was astonished at how much the old man had learned in seven years.” ~ Mark Twain

Lead by Example

Hopefully we ourselves are a good financial example. Leading and parenting by example is one of the most neglected strategies in the history of parenting. The Do as I say, not as I do method only works, when it does work, in the much younger days of a budding adult’s life.

And if you believe the apple does not ultimately fall far from the tree, while most parents try to kick the apple, you might defy that logic and move the tree.

This means if you are lacking in the area of financial success and are concerned of not being the best example for your teenager, you can start moving your tree by taking a course on finance, reading books, all the while subtly making them aware of what you’re doing and why.

The age of Father Knows Best has been replaced by transparency. Even if they don’t eagerly let on that they appreciate your efforts, they will be influenced by your example, even if it is only appreciated later in life, when they need it.

In the spirit of transparency, tell them you want them to be financially successful, ask how you can help them, and read this article with them!

Another put it this way, “I was strict with my daughter and didn’t let her start using makeup or hanging out alone with boys too early. She hated me for it at fourteen. She loved me for it and let me know as much when she was thirty.”

Don’t do this as a pretense, though. Sincerely work to improve your finances and let them see it. Advertise it too much and fall into the teenage self-defense method of psychological judo – using your own efforts against you!

If you happen to be financially successful, on the other hand, offer to discuss career and finances with them whenever they want, but don’t be too pushy. Pushing something on them does work, in the opinion of many, but may take added time before it is accepted and absorbed.

Be their friend and willing mentor on finance rather than an imposing authority.

“A drop of honey catches more flies than a gallon of gal. So with men. If you would win a man to your cause, first convince him that you are his sincere friend. Therein is a drop of honey which catches his heart, which, say what he will, is the highroad to his reason.” ~ Abraham Lincoln

A Clean Environment

Avoiding the adoption of negative conclusions can be as important as fostering good ones. In fact, all the positive information and example in the world can be nullified by a toxic home environment which the teen attributes to money.

The number one cited cause of divorces in the United States is money.

Secondly, realize your teenager is fantastically sensitive to the household events and more attuned to the nuances of what goes on than you probably realize. If there is tension in your home over money they are more than likely aware of it and forming negative conclusions about the responsibility of money.

Obviously the best solution for this negative milieu is to improve the environment, either by improving your own finances as above (and kill two birds with one stone) or by keeping a strict policy with your spouse to not only not fight in front of the kids, but to not discuss tense financial situations in front of them either.

This is how a business operates, by the way, in the goal of self-preservation and acceptable efficiency.

Finances are a hat handled by one department or person, not the entire crew. In fact a smart organization will hide a financial problem so it can get handled with the minimum of emotional upset throughout the organization, at least until there is a purpose or reason to involve non-finance personnel.

The Big Picture

They should first understand that

  • Actual money – cash and coin – is simply an agreed upon method of exchange, so we don’t have to carry around goats and chickens to barter with.
  • People must have confidence that their cash and coin will be accepted by others for it to have any value, and
  • They earn money in exchange for something: for their physical labor and skills, intelligence and expertise, or use of something they own.

As your teen goes through each day they are a party to your financial dealings and conditions as a family. Particularly if you are not a family that currently enjoys regular financial rewards such as vacations and nicer things, they may start to equate money with a sort of required, daily grind, or like a monkey on our backs we all must bear.

So set financial goals and make them known in the family. If your are working to take the family on an Alaskan cruise, make a chart or graphic and display it in your home, marking the progress you are making toward saving for it.

This sets a great example and real-life practical of what money can be used for, and involves everyone. It can be heart-wrenching to see a teenager want to contribute to the fund!

Just as important, take time to make your teen aware that there are stages of financial health and security, stages of wealth that you are aspiring to move through by cash-flow management, that your hard work is for more than just paying bills.

Make them understand the following maxim that so many adults never learn, but all pay for:

The money you earn today is not only for today but to provide for tomorrow as well.

And show them the stages of wealth as follows:

  • Financial Poverty
  • Financial Struggle
  • Financial Viability
  • Financial Fitness
  • Financial Buffer
  • Financial Independence
  • Financial Abundance

We might as well get them aware of such a scale as soon as money becomes a subject they are aware of. Most of the items in that scale are fairly self-explanatory.

Fitness would be a condition in which a family was managing their viable income so that all bills were paid on time and they are saving a part of each pay sum for investing and retirement – in other words, making progress and ever-improving, even if in small increments.

The Buffer stage means you have socked aside from three to twelve months of living expenses to meet emergencies if they arise.

Independence is that enviable and rarely achieved state where your investments now make all the money you need (passive income) to support your lifestyle. You no longer need to work and can retire if you so choose.

Abundance of course, means there are disposable or discretionary funds beyond what’s needed to support your lifestyle for charity, travel, leisure, and so on.

Give them the bigger picture; and give it to them as soon as they have any interest in it.

Hands On

Most snippets of consultation on this subject might go directly to this section concerning practical advice, which states that by hands-on experience of cash management, earning their own money and paying for themselves they will learn consequences and rewards for good or bad financial handling.

All of this is true of course, but without the above big-picture indoctrination they might miss the point and purpose of the larger role of finance in our lives, and their financial future be thereby stunted to that degree.

But of course, where the rubber hits the road is in their own hands-on application and early practice. Get them started with some of the basic trappings of money management such as

  • having a purse or wallet,
  • perhaps having a safe,
  • a checking account (shared by you),
  • encourage them to use a savings account,
  • encourage them to save ten percent of all the money they receive for savings (to be used however they wish as it accumulates),
  • obtain a pre-paid MasterCard or VISA for them to use,
  • offer them opportunities to earn money in exchange for various tasks or devise a list of chores they get paid for.
  • Include extra financial rewards and penalties for jobs done particularly well or with neglect.

If they offer to pay for a meal or your coffee, let them. The price you pay is your own ego, but the reward for you both is the bubbling pride they will feel!

Paying Forward

Some parents have taken the view that their children should contribute to the household in exchange for their theoretical rent, food, clothing, and so on. Indeed, some families find this is simply an economic necessity, and more than one rich man has stated

“If you really love your children, give them nothing.”

It sounds harsh but paying one’s own way through college is often an unintended blessing.

Perhaps an even more enlightened lesson can come from the granddaughter, who asked her elderly grandmother, “Grandma, you did so much for us. How can we ever pay you back?”

“You pay me back,” said the grandmother, “by taking care of your children.”

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