Time for a Reality Check

We all know money doesn’t grow on trees — it’s much harder to obtain, and then it seems to drain away faster than it is earned. If your teenager seems to see you as a personal ATM, then it may be time for a dose of reality.

Why It Matters

Managing income and paying bills are lifelong tasks.
Managing money is a learned behavior and comes under the parental adage of “you need to learn this.” Taking charge of personal finances gives purpose toward future goals. If your ninth grader’s future goal is buying a car, attending college or living independently after high school, then learning budgeting habits at this age sets the groundwork for a strong financial direction.
Saving money isn’t the only real-life skill to learn.
You know what bills your income needs to pay, but does your student? Explain the various bills that require payment every month — mortgage or rent, cell phone bill, utilities, groceries, insurance — and pinpoint which ones require priority because the amounts are pre-determined and outside of your control.

What Your Student Can Do Now

If not previously done, open a savings and checking account.
If your student already has a savings account for depositing birthday, holiday gifts and possibly a paycheck, that’s a very good start. Be sure to point out the benefits of compound interest and the time value of money discussed in an earlier article (July Article One on your personal dashboard). Using a debit card for daily incidental purchases is a good start to simple banking habits.
Request and use actual checks.
It may be old-fashioned, but using a check register to record debits and credits is a tangible reminder that purchases are actual deductions from an account balance, a precursor to simple accounting. There also may be times when a check must be written instead of using a debit card or auto-pay. Writing checks and addressing envelopes is a lost art, and your student may not mind getting a lesson in it.

What Your Student Can Do Later

Earn money.
Your student is at an ideal age to earn a paycheck from a part-time job or other jobs like babysitting or mowing lawns. Most employers who hire teenagers are used to scheduling them around all of their other high school activities. Even a few hours each week provides a paycheck and prompts a conversation with you about how much of that should be saved and spent. A good starting ratio is 80/20 — 80% is deposited into savings and 20% can be spent at your student’s discretion.
Knowledge is power.
Check into any high school classes offering personal finance or accounting. Encourage exploration into additional courses that may offer more in-depth information for your student.

What You Can Do

Talk about needs and wants.
Show your student all that is involved in maintaining a household and describe what bills or activities fall into each category. Explain your decision-making process when unexpected expenses arise and how you prioritize your spending to determine if an expense is affordable.
Give your student a monthly bill.
Decide if your student is ready to contribute toward a household bill. Perhaps a small monthly payment to you will offset the family’s cell phone bill in addition to creating a habitual commitment in your student.
Share your methods.
If you feel you have strong budgeting skills, share them with your student. If not, then here’s your opportunity to learn alongside your student! Explore a particular app to use together and set a common goal, whether it’s a family outing you can all look forward to or an anticipated household item.

Next Steps

Be sure to complete the survey questions at the end of this article to be entered into the 529 deposit giveaway!

Additional references, handouts and talking points are available in the right sidebar to use at your leisure. They may prove beneficial to reference now or after receiving future emails — we’ll leave it completely up to you. Use our emails like a recipe for a successful outcome — assemble the recommended ingredients and then follow accompanying directions to add flavor and depth.