The best way to teach your teen(s) about money is to start communicating. Talk to them about your own financial responsibilities - explain what a mortgage is, how you manage your income against expenditure, household bills, tips on budgeting, planning, savings and even investing. You could start by discussing the benefits of a Junior ISA (JISA) and how this could give your teen(s) the platform to begin saving and investing for their future.
When your teens(s) need new shoes, textbooks, or money for an upcoming school trip – sit them down and demonstrate how you budget each month, and what the net result of that specific expenditure means for the remainder of the month and beyond. You could use various methods for this, such as an Excel spreadsheet, an online application, or good old pen and paper!
What are some effective ways to teach teens about money?
- Give your teen(s) some responsibility around money – perhaps a weekly/monthly allowance to buy clothes, lunch money for school, or allocate chores where they will be rewarded after completion. After all, in the real world, we all must work to earn a wage.
- Take them food shopping to make them aware of the costs of branded goods versus the budget range. You could do a ‘taste test’ and purchase both items, so they can judge for themselves if the additional cost is worthwhile. This will also help when demonstrating the cost-saving between single items and multipacks.
- Teens often want the latest mobile phone or fashion trend. Explain that these trends come and go, and the latest mobile phone often has similar functionality to its predecessor. Talk to your teenager(s) about the things they want to spend their money on and ask them if them if they really need it, or could that money be saved/invested.
- Teach them the difference between spending money you have available, compared to utilising credit facilities. Explain how ‘borrowing’ works, and how bad debt could impede on their ability to buy a home/car in the future, due to a poor credit history.
Which works best for younger teens versus older teens?
Whatever the age, the more you can talk, the more they will understand and grasp basic concepts of earning, spending, saving, and giving money.
For younger teens (13 -15) you can introduce and discuss the basics of saving/investing, credit, debt, interest rates, budgeting, and identity theft.
For the older teen, it is important they understand the basics of income, payslips, good versus bad debt, credit score, credit agencies/checks, and income tax.
Is it ever too late to teach teens how to manage their money?
It is never too late, but make it fun and engaging, we don’t want it to be something else we nag to them about! ‘Monopoly’ and ‘Game of Life’ are a great way for teens to learn about money matters using board games.
There are a range of online applications out there for you to explore and some high street banks offer children’s bank accounts from the age of 11, in which they will have access to their own online banking application and debit card. As we alluded to earlier, the JISA is something else to consider, for a more longer-term view on investing/saving.