Teaching Teens About Money

5 topics to review with your recent grad

by Nic Vasquez

Knowing how to write a check seems obvious, right? Well, not if you’ve never had to do it. A growing body of research points to a lack of such seemingly basic financial knowledge among today’s teens.

Sure, check-writing is becoming rarer as people handle more financial tasks online. But if teens have never learned how to write a check, what bigger, more important financial concepts could their young minds also be missing?

Arming your teens with a foundation of basic money management skills is important. Parents: If you’re getting ready to send your recent grad off to college, or (eek!) “the real world,” now is the time to review some fundamentals. Below, you will find a few topics you might want to discuss. Even if you’ve had these conversations in the past, it doesn’t hurt to brush up. And if your teen responds with the ever-present eye roll, dare him or her to write a check and prove you wrong.

Opening and Using Checking Accounts

Beyond a check-writing tutorial, explain the purpose of checking accounts (and the responsibilities associated with them) as compared to savings and other account options. Whether your teen already has an account or is opening one for the first time, make sure he/she understands the account’s minimums, fees and features. Review how to keep the account secure. And explain the difference between a debit and credit card.

The Pros and Cons of Credit Cards

Does “letting” your teen have his/her own credit card teach responsibility? Or does it lead to early issues with debt? The answer likely depends on the maturity (and spending habits) of your child. Regardless of your stance on that debate, recent grads are often inundated with offers. Talk through the pros and cons of credit cards. Help your teen make educated decisions before responding to offers. And, if using a card, stress the importance of paying the balance in full each month.
Living Within Your Means

Talk about the importance of saving money for the future and having a budget – and sticking to it. (Perhaps your teen would prefer the term “spending plan.”) There are many online budget management tools out there, but a simple paper-and-pencil method works too. Your teen’s spending plan should list savings, wages and parental contributions as well as everything he/she spends each month on bills, loans, school supplies, eating out, personal care items, entertainment, etc. To help your teen stick to the plan, encourage him/her to:

• Spend money on needs first, not wants.
• Stay in and/or cook at home/dorm instead of going out when funds are tight.
• Unsubscribe to monthly streaming services that aren’t really used.
• Pay in cash when possible, instead of using credit cards.
• Buy or rent used textbooks online or at the college or local bookstore. Sell or return the books after the semester if that’s an option, and they’re no longer needed.
• Get in the habit of saving now. Even a little bit can add up over time and be a lifesaver if an emergency arises.

The Importance of Life Insurance

If you purchased life insurance for your teen in his/ her younger years, explain why you did so. Also explain why it’s a good idea to keep the coverage once ownership transitions to him/her. For permanent life insurance plans, the cash value could be tempting to those with student loans and car payments. Taking a loan against the cash value is an option, but that could have unintended tax consequences. And cashing out the certificate (policy) entirely may not be in your teen’s best interest for the future. For example, the plan likely has lower, locked-in premium rates. It may also provide guaranteed options to purchase additional coverage regardless of health.

Medical Power of Attorney

OK, so this one’s not entirely financial, but it’s still relevant. You may consider your 18- or 19-year-old to be your baby, but he/she is an adult in the eyes of the law. You can’t assume doctors will consult (or even notify) you if your baby ends up in the emergency room. In fact, they may not be able to legally. A good step to take when your son or daughter turns 18 is to complete a medical power of attorney document. This allows your teen to appoint someone to make health care decisions on his/her behalf. Some states also require a HIPAA authorization form. You can download these forms from a variety of online sources. Talk to an attorney for more information.