How to Teach High School Students About Money

There’s no better time to impart critically important financial lessons on your children than when they are teenagers.

High school may be among the best times of your life (or most cringe worthy, depending on how you look at it), but those four years are also critically important for reasons unrelated to homework, sports and social networks.

“High school age kids are at a pivotal point in their lives. Most are old enough to work outside the home and they’re about to make big decisions on colleges and jobs,” says Rich Ramassini, a father of a teenage son and director of strategy and sales performance for PNC Investments.

As teenagers exert their independence, they want to be seen and treated as a adults rather than as children. This can be a key time for parents to teach important lessons about money and what it means to be a financially responsible adult.

If talking about money with your kids makes you feel uncomfortable, you’re not alone. But also consider that if you’re not talking to your kids about money, there’s a chance that nobody else is, which increases the probability of them making uninformed financial choices when they are full-fledged adults.

“Don’t assume that your kids understand how to manage money, because schools aren’t teaching it in the way you expect – if even at all,” Ramassini says.

Not all students have the option to take financial literacy classes in school, even though research shows that students who take financial education classes later have higher credit scores and fewer overdue payments.

Ramassini says it’s important to find out what your kids know – and don’t know – about money and start having conversations now that will help them establish solid financial habits for life.

Here’s how to start:

• Teach yourself, then your kids. If your own money habits are a little dusty, brush up on some basics before talking to your kids. You should be able to explain general concepts like savings, overdraft fees, credit cards, budgets and compound interest. As you become more confident in your knowledge, it will be easier to help your child understand as well. At the outset of any conversations, you can ask them to explain some of these concepts to get an idea of what they may already know and thus establish a baseline for future lessons.
• Share your “money story.” Think about your relationship to money and when you first realized its importance. You may have worked a paper route and now view money as a reward for hard work – but your kids might see it differently and might not be motivated by the same things that motivate you.“Part of the challenge in talking about money is that everyone has a different relationship with it,” Ramassini says. “Even though money is an inanimate object, it represents access, power, status or even a lack of all those things. It can be the reason you are able to do – or not do – something. Because of this, it influences relationships.”Once your children understand where you’re coming from, they can better understand your financial decisions. Similarly, if you have a grasp on how your children view money, you can help the conversations be more candid and productive. Don’t be afraid to share your own money mistakes with your children so they can learn from them. Failure can be a powerful teacher.

• Let them get inside your head. Your kids probably don’t watch over your shoulder when you’re paying bills or reviewing your budget. But they likely do see you pay for discretionary items like shopping trips or dinners out. Make sure your kids get the full picture of how you manage your finances, including how you decide where you spend money and when you save. This becomes very important when your kids are in high school and face the  peer pressure to keep up.You should encourage your child to think before spending. Teach them to ask themselves, “Should I spend money on this now, or do I want to save or invest it so I can tap this money later?”“Teach your kids that when you save, you are giving yourself the opportunity to spend that money later. Words matter, and that shift can help kids have a healthy relationship with money,” Ramassini adds.

• Set consistent expectations. If your teenagers see you as The Bank of Mom and Dad, it’s time to change that perception. The best way to learn how to manage money is by experience. If your kids know they can always turn to you for whatever expense pops up, they may fall into bad spending habits.“Sometimes older children want to go shopping with their parents because they know their parents will pick up the tab. A good strategy is to ask children to pay for their own ‘wants.’ It’s amazing how quickly a need turns into a want when the child has to spend his or her own money,” Ramassini says.

• Allow them to make small mistakes. You may be tempted to set strict rules on how your kids spend money. A word of advice? Don’t.“Teenagers need to be impulsive in ways that are safe,” Ramassini says. “They want to be able to go to the mall or get pizza with friends and have some financial freedom. Let them make small mistakes with money now so they don’t make bigger mistakes later.”It’s important to talk to them about how much they spend on “splurges” like these and how they can set aside money for wants versus needs. Prepaid cards or gift cards can be great ways to reinforce safe spending.

The bottom line? “Actions speak louder than words,” Ramassini says. “Your kids observe what you do. When it comes to money – same as in all life lessons – what message are you sending them?”