Teaching Money Management

A couple of days ago I was interviewed by Neil Haley, host of the Total Education Hour radio program. This was the second time he asked me on his program, and this time he focused the discussion on preparing teenagers to handle their money. Neil’s Web site: http://www.blogtalkradio.com/totaltutor

The money management topic is not only timeless, but particularly appropriate with the current worldwide economic situation. I devote an entire chapter to the topic of money management in Toward College Success: Is Your Teenager Ready, Willing, and Able?

Neil first asked how a parent can teach money management to teenagers. I stressed that it can easily start earlier, but once your son or daughter becomes a teenager, one of the best tools for teaching money management is to put him or her on a budget. First decide who will pay for what—school clothes, athletic wear, shoes, underclothes, winter coats, entertainment, cosmetics, eating out with friends, etc. Once you decide what you will pay for, research average prices. What do you think is reasonable to pay for jeans? For tee-shirts? For running shoes? For flip-flops? Based on your research, come up with a monthly figure you think is reasonable.

While you are calculating, also consider the other teaching moments available when you put your teenager on a budget. Many parents require their teenagers to put a percentage of their monthly allowance into savings and a percentage into charity.

An additional money management teaching tool that I didn’t have the opportunity to discuss with Neil is to have your teenager sit down with you when you pay your monthly household bills. Show him or her the breakdown: mortgage or rent, utilities, garbage collection, cable and Internet costs, landline and cell phone costs, medical costs, etc. If you don’t already, make a point to save all your gasoline and grocery bill receipts. Then show you teenager just how much those necessities cost you each month. The topper is to pull out your credit card bill. Whether you pay it all off every month or just a portion, have your teenager calculate the interest and late-payment penalties. Credit card costs usually open their eyes.

These are just two of the more common ways to teach money management to teenagers. If you have some other ideas, share them here.