Neale Godfrey has written 26 books about finance for both adults and children, and her book, “Money Doesn't Grow on Trees: A Parent's Guide to Raising Financially Responsible Children,” made it to #1 on The New York Times Best Sellers List. Her new financial literacy app for children 5-8 years-old will be released in mid-October.
Here, Godfrey shares what she thinks the nine most important lessons are to teach our kids while they're in high school …
Summer vacation has probably already faded into memory, and “back-to-school” time is at the forefront of every parent's focus.
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In honor of the “learning” theme, I thought I’d chime in with the essential lessons I believe high school students need to know. For my own part, I sent both of my kids off to college with debit cards. Within a few months of handing them that responsibility, I got them each a credit card with a $500 limit. They were targeted by credit card companies soliciting on campus (we talked more about that here) and I told them, “Step away from the table. If you want a free t-shirt, I’ll be more than happy to buy you one.”
For some reason they listened to me, and waited until we got them a credit card the proper way.
Keeping the conversation about money open with our kids is the most important thing. Along those lines, here are nine things I think are important to talk about:
1. Where Money Comes From
Remind kids that money does not magically pop out of the ATM. (Trust me, even teens sometimes forget this.) The way you get money is to earn it, and it’s essential every teenager knows this. Even though I'm not crazy about kids having a job during the school year, as being a good student is responsibility enough, they should get a summer job at least. (We talked about how to help your kid find her first job here.)
2. The Basics of Budgeting
Teens need to understand the concept of “finite." Start with a clothing budget. Let them decide what clothing they think they will need for the quarter, then let them research the costs of each item. You can review their budget and decide if both the list of items and the prices are acceptable. Show them how you budget for certain items, and what it’s like to keep a household running, monetarily.
3. How to Use a Credit Card
After the budget is agreed upon, your kid will need real financial vehicles. Obtain either a cash card or a debit card for her, load the money on the card and let her spend the agreed budget allotment on her chosen items. Once the card is out, she’ll know she has no more money to spend. This is a good exercise in sticking to a budget.
4. The Best Way to Save
If your teen doesn't already have a savings account, it's essential that you set one up for him so he can make deposits for any money he’s earning. In order to open a savings account, you need a current driver's or non-driver's license, Social Security Number and usually a minimum opening deposit of $100. Depending on your bank, there may be monthly fees if a minimum balance is not maintained. Talk to your kid about the importance of saving a specific portion of his paycheck each week or month, so that he can begin to grow his own little savings nest egg. (Thinking of changing your bank? We can help you.)
5. The Importance of Giving Back
Now that your student is learning about earning, spending and saving, she needs to learn about charity, as well. Get your teen involved in giving back, and teach her that charity can mean both giving money and volunteering time. Perhaps she can help out at a local food pantry, or get involved in an ecological cause such as cleaning up vacant lots. Let her decide on a charity whose mission she is passionate about. The most meaningful impact will be if you can do this as a family. (Learn more about how to make charity fun for kids here.)
6. Owning a Car Means Lots of Responsibility
Brace yourself, parents--every teen wants a car. This is a perfect time to walk through the costs involved with owning and operating a vehicle. Even if your teens aren't going to have their own car, they still need to understand how much it costs for gas, maintenance and especially insurance.
Take your teen to visit your car insurance agent so he can explain the cost involved with car insurance based on different circumstances. Have your teen ask the agent what happens if there is an accident, and if they were to get caught with any illegal substances while they drive.
7. Investing Is the Best Way to Build Your Worth
The next important lesson is investing. If you can, set up a meeting with your broker so he or she can introduce the concepts of a portfolio. LearnVest has a ton of helpful advice to help you teach your kid about investing as well, like this piece about the five questions to ask when making a financial investment, or this quiz about investing personalities.
8. Having Fun Costs Money
Decide what you're willing to spend each week to fund your teen's entertainment, and what she’ll be responsible for herself. Put that agreed amount on her debit or cash card each week and stick to that number. And this is important: Don't give in when she starts nagging. If you do, you may end up with a spoiled kid on your hands, someone who doesn't know how to handle money when she's out on her own.
9. You Have to Budget for Gifts, too
Talk to your kids about gift giving. Work with them on a holiday budget, and encourage them to set a limit per gift for friends and family. Come holiday time, you should also discuss the “limit” so that everyone can buy into that agreement. Explain that a gift says, “I care about you” and not, “I spent a lot, therefore my gifts are better than yours." In addition to a gift-giving budget, remind him that gifts can also be gifts of time and love, such as something they make. (We love DIY gift ideas too! We have some fun ones here.)
Tell us--what financial lessons had your kids learned by the time they were in high school?