As we strive toward independence through homesteading and sustainable living, it only makes sense to teach our children how to be financially independent as well! As a parent to many teenagers, I’ve put together these tips and tricks to help you with “How to Teach Your Teenager Financial Responsibility”.
When we’re raising a young family, our children are unable to care for themselves and require a full investment of our time and money, obviously. However, as they grow into the teenage years, a gradual shift needs to take place.
Teaching our kids about money and money management doesn’t just “happen” one day, it’s a process over many years. Our children learn a lot about money by watching us! (Scary thought!). We need to be able and willing to set a good example of financial stewardship, and be a model of what we hope to see them become.
Between the ages of 14-21, our teenagers need to learn all they can about financial responsibility and experience the process of becoming financially independent from their parents.
There are 2 primary reasons that this transition is important.
First, our kids need plenty of time, notice the 7 year spread of age, to learn how to earn money, how to manage it and how to recover from mistakes.
Second, we as parents are coming into the last decades of earning potential. Dreams of a sustainable life, purchasing a piece of land or building your own home take money and you don’t have forever to earn it.
Do you know the greatest risk is to your retirement dollars?
Want to hear another true statement?
The time period after your earnings years have ended is when you are most at risk to lose retirement dollars.
Now that I have your attention, this transition for our kids takes time and patience, but it is a very worthwhile endeavor.
Most of us didn’t get much financial training growing up.
Can you think back to how many mistakes you’ve made with money over the years that could have been avoided with some early training about how money works?
Yeah, me too.
Training your children about money and teaching your teenagers financial responsibility, even if you have to train yourself first, is an important legacy to give to your kids.
Tip 1: Train Your Children to a Work Ethic
Teaching our children about how to earn money is secondary to a job well done. Our kids need to be taught the difference between a good job and a poor job. Poor jobs or attitudes are not acceptable. Work is part of life and for every job they do, whether it be taking out the trash at home or being promoted in a corporation down the road, let them know that their job performance is directly tied to their name and reputation. We want our kid’s names to be associated with trust, integrity and hard-work. This begins at home.
Tip 2: There is Paid Work and Un-Paid Work
We’ve always had a chore chart on the refrigerator, and the kids know what their responsibilities are around the house.
They are not paid for this, because we are a family and everyone has to pitch in to keep the home running.
However, there are other projects and opportunities, outside of their regular chores, to earn money.
Offer these opportunities to your children and invite them to work along side you.
Let them experience the relationship between a job well done and being paid for it.
That’s a great feeling for a kid! This works well for kids 8+ and is a terrific tool to teach your teenagers about financial responsibility.
Tip 3: Teach Your Teenagers How to Manage the Money They’ve Earned Right Away
Have a system in place so that whenever your children earn money, or receive birthday money and the like, their dollars go directly there. We gave our children accordion files (like for canceled checks) and labeled several of the slots inside as “Spending”, “Saving”, “Giving”, “Christmas”, “Clothes”, etc. Very early on, our kids were funding different categories for themselves.
None of this money could be spent without discussing with us first. Anytime our children wanted to use some of the “Spending” category, we would discuss the value of the item they wanted. This isn’t being a control freak as much as we were trying to help them to make the link between giving up hours of your life working in exchange for something tangible. Is this item really worth it? Will it last? Is it something you’ll still enjoy next week? We all need to ask ourselves these questions so that we make better decisions, and again, it’s starts early and at home.
The “Savings” category went into a savings account, which we turn over to them when they seem financially able to manage it. This depends upon the child, but sometime during college years or shortly after.
“Giving” is a category that is important to us as a family, we want our children to be comfortable giving of their time and money to others. Being “others-minded” in life keeps us humble and compassionate.
The “Christmas” category is a lot of fun, especially come December when they see that they have all this money to go shopping for their siblings and family! They feel so grown-up! Better yet, the lesson here is “delayed gratification”. Twelve months of savings before they can spend it, but what a valuable lesson for them.
“Clothing” is a great category to take the conflict out of buying clothes for a fashion hungry child.
At first, in the early years, the child can begin to use those dollars to contribute to their clothing needs.
However, as your teenager begins to work a job (15+) then that category becomes more exclusive and they can begin to purchase their own clothes with their own money.
So, when they want that new jeans or pair of Vans, you can ask “Do you have the money for that in your “Clothing” envelope”? If not, then they will need to wait.
This is true financial responsibility, when our teenagers realize that they can begin to provide for their own needs.
Tip 4: Give Teenagers the Tools They Need
When your teenager begins working outside the home, they will need a bank account.
Go with them and show them how it’s done. This is a time when our teenagers need our direction about how to be financially responsible.
Discuss how their debit card works and how to check their balance frequently.
Show them how to begin to save directly from that checking account, and how all the money skills they’ve learned thus far just fall into place, in the adult world.
Tip 5: Let Teenagers Make Financial Mistakes
We all make mistakes and so will our children, there’s no question about that. Making financial mistakes is an important part of teaching them financial responsibility.
The important question to ask yourself is “Do you want your teenagers to make little mistakes while living at home that they can learn and recover from? Or do you want them to make big mistakes after they leave home that are much harder to recover from?”
Use those mistakes as a teaching time, not a time of judgement. Remember, we are their best examples and teachers!
Tip 6: Begin the Transition of Expenses as Their Income Increases
This financial transition begins once the teenager begins working and extends throughout college or other vocational training.
It’s not black and white, believe me.
Every kid is different, and you’ll have to use wisdom as you navigate this.
Some kids are student athletes in high school and won’t have time to work as many hours as a child who isn’t involved in athletics. That’s ok as long as they are doing something to earn some kind of money, whether it be mowing a lawn or two or babysitting.
By high school, they should know that there’s no “free ride” in life.
Of course, teenagers are still unable to support themselves, but they can begin to contribute to their spending, clothes and gas money.
Using the categories above or creating your own gives your teenager purpose for their earnings and increases financial responsibility.
Tip 7: Lessen the Expectations
Oh lord, this one is hard.
During middle and high school, it seems that I hear “Well, so and so’s parents bought him THIS” weekly.
From designer clothes to new cars, it seems that ALL the other kids get more than they do. Well, we know that this isn’t really true, it’s more about their perception.
However, there are parents who feel it’s a good idea to get new cars for their teenagers when they start to drive.
I do not.
For so many reasons that I won’t go into it here.
Nonetheless, if you expect your teenager to be financially responsible and hold a job, they will need something to drive.
We’re big fans of the “Beater”, an older, safe, fuel-efficient car with (quite a few!)dents and scratches.
Helping teenagers understand that no one gets everything they want isn’t easy, even if your home and lifestyle has been modest. This culture is all about consumerism and the pressure is great for them to look the part.
Take the time to discuss Needs vs. Wants with your teenager.
Listening to their struggles will go a long way to help them feel heard.
Take the time to explain why you choose not to buy something. Your child probably won’t agree with all of your decisions and that’s ok, they aren’t the parents.
They may not act like it, but they’re listening. You’ll see this when they get to their mid-20’s.
Tip 8: High School Graduation and Beyond
I don’t believe that any kid should be left completely on their own at 18 years of age, they just aren’t capable to support themselves working for minimum wage or as a college student.
That said, the transition of support should continue as that young adult works through college and/or vocational training.
If at all possible, I encourage parents to let their kids get the career training they need before cutting them loose financially.
Again, this isn’t a black and white subject.
If you have a child with special needs, they are going to need more help for a longer period of time, just make sure it’s not forever if you can.
We have a child who plans to go to medical school, so our transition plan for her will look different.
Take this one kid at a time because they’re all different, but make sure they are aware of the plan and at least be heading in the right direction…which is to get off your payroll!
Your homestead dream might not happen until the kids are grown
A large majority of folks who call themselves homesteaders made the lifestyle change after the kids were grown.
They sell the big house and all/most of their possessions to head for a simpler life. Once again, this happens many times at the end of or after the earning years, so you’ve got to hang on to your dollars.
If you take the time to educate and train your teenager in financial responsibility, this transition will come full circle in due time and you’ll be able to sip your coffee on the front porch as the roosters crow!