How I’m Teaching My Clients’ Teens About Money Management

In today’s digital age, teaching teenagers about money management is crucial yet challenging, especially when many parents weren’t appropriately taught themselves. As a financial advisor, I’m helping my clients navigate this important task by focusing on relatable technology, practical experience, and fostering a positive money mindset. By starting early, we’re setting these young people up for financial success and reducing stress in adulthood.

Key Takeaways

• Utilize technology like the Greenlight app to make money management relatable for teens.
• Implement a job system with clear allocations for saving, spending, and investing.
• Encourage teens to invest in companies they understand and use.
• Foster a positive money mindset to reduce future financial stress.
• Start financial education early to set teens up for long-term success.

The financial landscape for today’s teenagers is vastly different from what their parents experienced. With the rise of digital payments, online shopping, and easy access to credit, young people are faced with financial decisions earlier and more frequently than ever before. At the same time, many schools still lack comprehensive financial education programs, leaving parents as the primary source of money management knowledge. 

The Council for Economic Education 2024 Survey of the States revealed that 35 states require high school students to take a personal finance course to graduate. While this is an improvement over the last few years, this gap in financial literacy can lead to poor financial habits and increased stress as teens transition into adulthood. As a CFP and founder of a modern family office, I’ve seen firsthand how early financial education can set the stage for lifelong financial well-being.

One effective tool I recommend to my clients is the Greenlight app. While I’m not affiliated with the company, I find it an excellent resource for families looking to teach financial literacy. The app offers a comprehensive platform for learning about budgeting, saving, spending, and investing – all in one place. It’s handy for parents who may not have a strong financial background themselves.

What I’m Telling My Clients

Beyond recommending tools like Greenlight, I advise my clients to implement a job system for their teens. Here’s how it works:

1. Assign tasks with monetary values (e.g., $10 for yard work).

2. Allocate earnings: 50% goes into a long-term investment account (we call this “taxes”), and the remaining 50% is for the teen to manage.

3. Guide teens in setting savings goals for larger purchases like computers or cars.

4. Introduce investing by letting teens buy stocks in companies they know and use (e.g., Disney, Amazon, Netflix).

5. Regularly review investments to teach about market fluctuations and long-term thinking.

For example, when Amazon’s stock recently took a hit, one client’s son wanted to sell. This presented a perfect opportunity to explain the concept of buying low and holding for long-term growth.

Important

I emphasize to my clients the importance of open conversations about money. Hiding financial matters or avoiding these discussions can disadvantage teens. By involving them in money management early on, we’re preparing them mentally for the financial realities of adulthood.

The Bottom Line

Teaching teenagers financial habits is about more than just wealth creation – it’s about setting them up for a less stressful, more joyful life. By using relatable technology, providing hands-on experience, and fostering a positive money mindset, we can help the next generation develop a healthy relationship with finances. As financial advisors, guiding our clients in this crucial aspect of parenting not only benefits their children but also contributes to breaking the cycle of financial illiteracy.

Read the original article on Investopedia.