Financial Literacy For Teens: Get Money In THEIR Hands

Inside: Why teaching teens the value of money is such a crucial life lesson If you are looking for more information, check out this book, It Makes Total Cents.

My parents handed me the shiny blue card they always used to pay for stuff. But this one had my name on it! Power! I was off! Oh, and yes, in fairness, they said something about “…only for true emergencies…” But I had to test it out, right? That was the responsible thing to do, so to Starbucks drive-thru I went. Success! This was much easier than carrying cash, digging coins out of my piggy bank, and asking friends to cover their share. And our puppy, Sadie, got in on things too… “One pup cup, please.” Anyway, months passed, and that card was burning a hole in my pocket—irresistible. I kept “testing” the card. It always worked… until it didn’t. I found it cut in half by the toaster with an invitation to join Mom and Dad in the living room for a discussion.

Needless to say, my parents noticed. Just about 30 days following my credit card’s destruction, we sat at the local bank branch with the teller shifting $183 from my savings account into my parents’ account. I was mortified by my immaturity and by how much I spent on sugar water—now quantifying how many Saturday nights it would take me to earn $183.

How our credit card culture impacts financial literacy

Walking the halls of my high school, I hear “I’ll just buy another one” daily. It’s a mindset, even a habit, built over years, and has resulted in a generation that tends not to appreciate the value of money—what it takes to earn it and, mostly, what it takes to keep it! Teens (and arguably, many adults) fail to realize that a “charge it” culture exacerbates and compounds over time, literally and figuratively.

These unfortunate instincts that evolve over time trace back to habits from childhood but can be unlearned. Think back….. at five years old, your mom takes you to Walmart and walks through the toy section. Items speaking to you, calling to you, “Take me”, “You can’t function without me!” You tug on your mom’s jeans, stick your arm straight out, put the pouty face into action, and maybe add a whine. Mom says no, you drop to the floor, yell, scream, and cry. As onlookers pass, wearing scathing judgment on their faces, she relents, “Okay, just this time.” It’s not really Mom’s (or Dad’s) fault… it’s our culture.

Fast forward to college, probably not having had to work to spend money, and you notice that the kids in your economics lecture dress in preppy polos and Lululemon while you arrive in sweats. After class, you replay the scene in Walmart…. “Mom/Dad, I NEED new clothes.” When we’re told no, you insist that you are not being understood and in your infinite wisdom, spend your book money on Lulu!

And so it goes… from graduation to the “real world.” Bad habits carry through, and they are really hard to change. The result is a generation with no financial literacy skills. I’m talking about me and my friends, desperately missing the meaning of a dollar, how hard it is to earn, and more so, to save.

Why teaching teens the value of money is so crucial

To shift this dynamic to become financially literate kids who understand money management, we need to start interacting with our parents (and one another) as early as possible—all within the context of earning before spending. Our financial futures depend on it.

Imagine, for example, a scenario where a $10 purchase in Walmart is granted, but only on the basis that they contribute $1 from their bank accounts. The point is furthered when kids are asked to imagine having had to produce not just $1 towards the toy but $9 more.

This approach, scaled to suit our ages, teaches an important life skill on value as well as the relationship between working and earning and what earnings enable, be it spending, savings, etc.

If a toy costs $20, but you only earn $10/hr mowing the lawn, that decision becomes more real—what’s the value of the purchase? Is it worth two hours of chores? The price is no longer a tag that says $20, but rather, a price that equates to two hours of lawn mowing on a Saturday, taking out the garbage, doing the dishes for a week, and so on.

Financial literacy will never be learned until the long term relationship between working, spending, and saving is contextualized—until we understand the value of a dollar and the money is put “in our hands.”

I recently had a conversation with Tom Henske, financial planning expert and author of It Makes Total Cents: 12 Conversations to Change Your Child’s Future. Here were some key takeaways from our talk about the importance of teaching teens the value of money:

It’s okay to let kids make stupid mistakes. Kids will not grow if we catch them every time they fail. Get money in kids’ hands for them TO make mistakes.

Oftentimes, kids and young adults don’t learn from their parent’s financial mistakes until later in life. Don’t wait to educate them on your financial fallbacks.

Put money in your teens and tweens’ hands and let them experiment with them. Around 13 or 14, encourage them to get a paid job, so you’re not just putting money in their hands.

Gamify everything from a young age. Ask, “How much do you think that costs?” Youngsters don’t understand the value of a dollar.

Make your kids pay the check at the dinner to see the expense build, understand the additional fees, and learn how to complete a 15-20% tip.

Delayed gratification! Don’t loan them the difference every time because it often never works.

If you have the ability to, give your teenager an allowance up until high school and then encourage them to get a part-time job and start earning their own paycheck.

I learned a hard lesson at the drive-thru—definitely something about self-control and discipline with money. One thing is clear: absent the opportunity to hold “money” in my hands, the basic premise of saving vs spending was probably a long way off. That said, I’ve just increased my babysitting rates and am now very seriously thinking that instead of Sadie and I hitting the drive-thru at Starbucks, it may be time to buy some shares in the company!

Looking for more information on teaching teens the value of money? Check out this book, It Makes Total Cents on Amazon.