Raising a Financially Literate Teenager
It’s back-to-school month for our household, and my 14-year-old is off to high school. Where has the time gone? As a financial planner, I often question if I am doing enough to equip my daughter with the financial life-skills she needs to become a strong, independent, and savvy woman.
Financial education has always been a cornerstone of my career. While I don’t claim to be an expert on teaching kids about finances, I’d love to share some of the techniques I have used with my daughter over the years.
She learned the basics of credit by borrowing from the “Bank of Mom” and repaying on time. She practiced counting her money, keeping it safe, shopping at a makeshift store we set up in the living room, and saving for things she wanted. She made a few mistakes along the way, but I was there to guide her and help her learn from them.
As Joline Godfrey states in her book, Raising Financially Fit Kids, “Allowance is not an entitlement or a salary. It is a tool for teaching children how to manage money.” She also emphasizes that there is no right amount to give; the key is to start small and increase the allowance as the child’s ability to manage responsibility grows.
When my daughter turned 13, we opened checking and savings accounts at our local credit union. Although I am the joint owner, the account is in her name, and she has full control over it. She has a Visa debit card and has been managing her accounts successfully, earning interest on her savings. She thoughtfully transfers money from her savings to her checking account as needed.
According to my current research, typical allowance rates range from $1 to $2 for each year of a child’s age. My daughter receives $20 every two weeks, and I also cover her share of the iCloud storage bill. Seeing how well she manages this, I’m considering increasing her allowance to help her learn to budget for school clothes, supplies, and other expenses.
I’m incredibly proud of her understanding of saving and comparison shopping. She saved over $400 in seven months from Christmas and birthday gifts, babysitting, cat sitting, doing odd jobs, and her allowance. She even sold her Amazon gift cards to friends and family to convert the value to cash, which she deposited into her account. With her savings, she bought a used cell phone after thorough research and comparison shopping.
My daughter is passionate about horseback riding and dreams of owning a horse someday. This summer, she conducted a research project on the costs associated with owning a horse, including purchase and maintenance expenses. This exercise was eye-opening for her, and while she still aspires to own a horse, she now understands the financial commitment required.
Over the next four years, I aim to teach her additional financial skills, such as:
- Using credit wisely
- Planning a vacation
- Understanding salaries for different jobs and careers
- Exploring college costs and funding options
- Investing and understanding dividends and interest
- Appreciating the time value of money
- Negotiating pay and how to get paid what you are worth
- Living on a budget
- Evaluating the costs of buying and owning a car
And much more
I hope this blog post inspires you to think about ways to educate your teenager about personal finances. Here are some helpful resources I’ve found:
Financial Literacy books
- Raising Financially Fit Kids by Joline Godfrey
- I Will Teach You to Be Rich by Ramit Sethi
- The Opposite of Spoiled by Ron Lieber
Financial Literacy Programs
- Junior Achievement
- FDIC Money Smart for Young People
- Schwab Moneywise America
- NY Public Library Books Resources
Explore Other MainStreet posts
- Money Habits to teach your children
- Four Things I Want My Daughter To Know by High School Graduation
- Money Tips for Young Adults
- Becoming a Financial Grown Up
- Early Financial Education: Teaching Kids Money Skills from Ages 5-8
As Joline Godfrey says, “Financial literacy is not about the money but launching great kids!”
