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Pamela Yellen
Pamela Yellen Financial Security Expert
over 2 years Story
How to Raise Financially Savvy Teens

Use teens’ desire for more autonomy to help them learn to manage money

Do your kids think money grows on trees? Are you tired of saying “no” to the constant requests for the latest “must have” electronics, gadgets, sneakers and more? I’ve been hearing for years from readers who say this is a big challenge they face.

The adolescent years can be tough. Teens face peer pressure to have the latest gadgets and fashions. They’re hit with academic pressure as they realize their performance now affects their ability to get into college later. They’re betwixt and between, wanting to be independent and strike out on their own, yet not feeling confident enough to do so. And all of this is accompanied by raging hormones!

As a natural part of growing up, your teenagers begin to separate from you. They need more autonomy and privacy. They spend more time with their friends than with family.

Teens are starting to decide who they want to be and how they want to live. They want to be independent and stand on their own two feet. Financial literacy is a powerful tool to help them toward these goals.

If you haven’t started your child’s financial education yet, it’s not too late to begin. However, there are key lessons for younger children you should not overlook. These include teaching them to:

  • Evaluate purchases based on pleasure and importance.
  • Understand the difference between wants and needs.
  • Realize that advertisers are trying to manipulate them.

All of these are building blocks for your teen’s financial literacy. As kids get older, keep these additional points in mind:

  • Keep tuned into WII-FM: Teens aren't interested in learning about money to become "financially responsible adults."  They're interested in gaining more independence and more freedom. Every child (and every adult, for that matter) is tuned in to their favorite radio station, WII-FM—”What’s In It For Me?” So as you teach your teen about finances, continually reinforce what’s in it for them. If you connect becoming financially savvy with becoming more independent, they'll be extremely motivated to learn.
  • Clean up your mistakes: By now, it may have occurred to you that some of the ways you’ve handled money with your kids haven’t been the smartest. Perhaps you gave them allowances with no requirement to do chores. Maybe you rescued them from financial missteps or didn’t allow them to make even the smallest of decisions on their own regarding money. Well, you didn’t know what you didn’t know, but now that you know, it’s time to change course. Don't sabotage their futures by continuing unhealthy family patterns with money. Make the commitment to change those counter-productive patterns, and explain to your teen (probably over their loud protests!) why you’re doing so.
  • Correct your failure to communicate: Good communication with teens is almost an oxymoron!  They're frustrated with their parents, and typically their parents are frustrated with them. "Because I say so!" is no longer an effective explanation, and they're no longer the compliant eight-year-olds you once knew. On the bright side, in another ten or twenty years, odds are, they’ll realize that you’re pretty smart, after all.

The burden is on you to keep communication channels open, so your teen can hear what you have to say about money. Here are five more tips from the desperate parents' handbook:

1. Be a good listener first
2. Acknowledge and support your teen's increased self-sufficiency
3. Accept their feelings and respect their opinions
4. Admit it when you're wrong, and discuss your mistakes and what you learned from them
5. Above all, avoid nagging, guilt trips, and lecturing!

When talking about money, adjust your language so your teen can relate and feel motivated to learn. Avoid any statement that could be accompanied by a wagging index finger, like “You have to learn this so you’ll end up being a responsible adult, not a deadbeat like your Uncle Harry,” or “You’re not getting a credit card, young lady, until you show a little maturity with your spending.” Your teen will instantly flip into “I can’t hear you” mode.

You’ll get better results with, “If you learn to be financially savvy, you’ll be able to create a life where you can have and do the things you really want to do. Would you be interested?” Or “If you’re interested in getting your first credit card, I know exactly how you can earn it. Would you like to know?”

Help set your teens up for future success by letting them make smaller money mistakes now. Let them flex their money muscles with checking accounts, prepaid debit cards, and the responsibility for covering some of their own necessities. If you connect becoming financially well informed with becoming more independent, they’ll be extremely motivated to learn.

As you teach your teen about finances, continually reinforce what’s in it for them. Use the things they want, such as a car, a college education, a place of their own, as valuable financial lessons in areas like comparison shopping, estimating costs, delayed gratification and saving toward a goal. Financial literacy will give them autonomy, self-confidence and competence—all life skills they crave.

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Pamela Yellen
Financial Security Expert

Financial security expert Pamela Yellen is author of the New York Times best-selling book, THE BANK ON YOURSELF REVOLUTION: Fire Your Banker, Bypass Wall Street, and Take Control of Your Own Financial Future. Pamela investigated more than 450 financial strategies seeking an alternative to the risk [...]

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