Shortly after my now-husband proposed to me, he broached a delicate subject. After dinner one night, he sheepishly looked at me and asked me to reveal a part of myself that I hadn’t previously shown him. As I considered his question, I wondered if I could go all the way. Could I trust this man? How well did I really know him? After four years of dating, I had agreed to marry him, and though my 23-year-old self was nervous, I looked at him and said yes to his request. I slowly got off the couch, sauntered to my bedroom drawer, and pulled out my checkbook.
We spent a long evening revealing our financial pasts to each other in preparation of our upcoming union. Honestly, it was more eye-opening than when we shared our sexual histories when we met four years prior. Looking back on that conversation and thinking about how inexperienced we were financially as college kids, it’s made me realize that we have our work cut out for us as we prepare our teenagers to become more financially independent.
As parents, we don’t want to see our kids struggle, and it’s our natural inclination to want to help when the going gets tough for our teens. But money management is an important life skill, and considering the staggering debt millions of Americans carry monthly, there are ways we can help our kids be smarter about their money choices. At the very least, we need to make sure they aren’t calling home every weekend for beer money while they are away at college. Here are some suggestions:
1. Teach your teen how to budget.
We all heard our parents yelling, “Money doesn’t grow on trees!” as we grew up. And now that I have a mortgage, I understand why my dad was apoplectic when the credit card bill arrived every month. Take time to sit with your kids and sketch out a realistic budget for the income they have and help them budget their funds appropriately.
The business of being a social teen isn’t cheap and helping your teen create a balance sheet can be the springboard to sound money managing when they become adults. Stress the importance of getting a part-time job to save money for future college expenses and help them put those funds in an account that they can draw on for their expenses. Be honest with your teen about your own budgeting wins and fails and you’ll be surprised at how much they are willing to learn.
2. Teach your teen basic accounting skills.
On the night I showed my now husband my checkbook, he was appalled at my clear ineptitude for balancing my budget every month. And by “budget,” I mean my “close my eyes and yell ‘No Whammies!'” method of spending money. I lacked the skills necessary to adequately keep track of my limited funds and by the time I graduated from college, my books were a mess.
These days, accounting is a breeze with the advent of software and apps that can track spending. Familiarizing your teen with these programs before they hit the dorm will lead to a lifetime of strong accounting skills. And, trust me, it’ll spare your teen from an embarrassing conversation with their future spouse.
3. The parental buck has to stop eventually.
At some point, you will have to have a conversation with your teen about taking on the responsibility of their personal spending habits. Whether you make them responsible for their gas money, contribute to their car insurance bill, or ask them to foot the bill for their prom attire, encouraging your teen to pony up for some of their expenses in high school will teach them valuable lessons in budgeting and money management. Having a part-time job in high school not only makes financial sense, it will also prepare your teen for the time management necessary when they are juggling college courses on a busy campus.
4. If you don’t have it, you can’t spend it.
Credit card companies practically salivate over teenaged applicants because of their financial inexperience. Talk with your teen about the realities of credit card debt: interest rates, credit scores, and missed payments can significantly impact their ability to make larger purchases as adults. Gently remind your teen that a $25 dinner charged on a credit card can wind up costing them $75 with interest rates and late fees if they aren’t careful with credit card use. Encourage your teen to use a debit card drawn on their checking account to not only help them budget their money but to also curb impulse spending. If they don’t have the funds, they’ll have to save a few pennies in order to buy those new sneakers.
5. Clearly define what constitutes an “emergency” and hold your ground.
Many parents give their teen a credit card for emergency purposes. While this is prudent in theory, often the lines between what constitutes an emergency are blurred for teenagers. Clearly spell out your financial boundaries for your teen. Those Brandy Melville shorts from Pac Sun? Not an emergency. Stranded on the side of the road at night with no gas? Definite emergency. Set clear boundaries with your teen and if they step outside those lines, expect payment back in full — with interest — because money doesn’t grow on trees, right?
Sending your teen out into the world is scary enough without the added worry that they will face-plant financially. And though you’ll always be there to help, giving your teen the tools to become independent will not only give him a lifetime of good financial choices, it also means that retirement cruise you’ve been saving for will get here that much faster.