Give Your Kids an Edge* – Part II
I’ve already discussed my plan for teaching my son about money through age 10. This post contains my thoughts about how to approach the most challenging group of children – teenagers.
Age 11-18:
This is the critical age group; it probably will be my last chance to teach my son about money. There are many things that you can do in this timeframe:
- Open a savings account. Banks realize that children are prospects for future loyal customers, so some may offer extra incentives. They should at least offer accounts with no fees or balance minimums.
- Let them get a job to earn any extra spending money they need.
- Talk to them about credit (this is a big one!). There are many simple things that they should know: how interest works, why you should pay bills on time, why you shouldn’t max out a credit card and how issues on your credit record can lead to problems getting a job, obtaining a loan, starting a cell phone plan or even renting an apartment.
- Consider familiarizing your teenager with a debit or credit card. Look into prepaid cards, and link them to your account (so you can monitor their purchases). Or get them a card with a low credit limit. There are many options, so be sure to do your research to find the best solution for your personal situation. If you co-sign for the application, just remember that you are responsible for the debt too. Credit card companies heavily target college students, so teach them proper use of these cards before you send them off.
- Introduce them to investing. Talk about stocks, bonds and mutual funds. Tell them how you are planning for retirement and the challenges you are facing.
- I will share any mistakes that I have made in the past and how they could have been prevented.
Once he turns 18, I should be able to recognize his established money habits. If he has learned well and has proven that he can make good decisions, there may not be much more to be taught. If, however, he still seems to be making poor decisions, I will probably keep a closer eye on him.
That’s about it; I want to keep it simple yet reinforce all the important things he’ll need to know. If you decide to take a similar approach, just be aware that adjustments may be needed for your child and your situation.
For supplementary information about teaching money concepts to teens, please take a look at the following sites:
Again, I believe that many of the problems Americans face today are a reflection of our limited knowledge about money and financial education earlier in life. While there are no guarantees that my son will not have his share of financial difficulties, I can at least find comfort that I have done my part; the rest is up to him.
As always, if you have any comments or ideas on what has worked for you (or what hasn’t), please post them – they are greatly appreciated.
Originally posted by Kevin Jaegers, Senior Investment Adviser
Edited and updated by Carolyn Humpherson, Financial Communication Specialist
*Please note that this blog posting is a slightly modified version of a blog entry originally posted in January 2009. We call our re-posted blog program Second Chance: Blog Posts Worth Re-reading, and we only include our favorite posts.
About Smart401k
Smart401k is a Web-based investment adviser providing unbiased advice to help employees invest in their employer-sponsored retirement plans. Smart401k provides service to almost 11,000 clients who collectively have more than $1.5 billion in assets. Individuals receive personalized investment recommendations based on the funds in their plan and support of professional investment advisers available to answer all investment questions. Based in Overland Park, KS, Smart401k can be found at Smart401k.com.
