TEACH TEENS TO BE MONEY WISE
As originally appeared in The Jerusalem Post on January 25th, 2019.
Teenagers blithely skip off to uncertain futures, while their parents sit weeping curbside in the Volvo, because the adolescent brain isn’t yet formed enough to recognize and evaluate risk. –Michael J. Fox
What is a good birthday present for a boy turning 16? This is the dilemma facing my wife and me as we have just a few more days until our son hits that milestone. The most obvious gift would be to get him his very own couch, because he spends a significant part of each day lying on one, to the point that most other family members have nowhere to sit. Only problem with this gift idea is the cost and lack of space. The boy has let it be known that he would very much like a trip abroad to celebrate; not happening! Then a light bulb went off and I had the idea of signing him up for a couple of personal finance courses so that he can start learning how to be responsible with money. Okay so I am not that cruel. But the thought of presenting him with this and seeing his reaction, made me think again that maybe it’s worth it!
While I may have criticism regarding the Israeli education system, one great course that my son has in 10th grade is a personal finance course. I applaud his school for making it mandatory. They learn all the basics about bank accounts, how credit cards work and the dangers inherent to them, the need to budget and be responsible with money. The fact is that this course will serve him more in life than practically everything else he will learn in high school.
Education
Teenagers need to learn responsible money habits. Just like most things in life, if kids learn the ‘right’ lessons they will have a much easier time being financially responsible. If they see bad money habits in the home, and never are taught or shown how to properly deal with money, then chances are that they will make costly financial decisions when they get older.
One of the issues that I struggle with is what to buy for older kids and what to make them buy with their own money. On the one hand they are still at home and dependent on you for most things financially. On the other hand, they have worked and now actually have their own money and if they ‘need’ something, why shouldn’t they buy it themselves. Funny thing happens when that is suggested. Often the ‘need’ is no longer so important.
I think actually that helping teens understand the difference between and ‘need’ and a ‘want’ is paramount. How many adults confuse the two terms. Well if kids are encouraged to be able to differentiate between the two, then a lot of financial stress will be avoided in adulthood.
Learn how to save
It’s important to teach your kids the importance of saving. Even in Israel, where no interest is paid, I think that teens should have a bank account. If you can open an account abroad for them, they can actually earn interest, even on money market accounts and can start learning about investing as well. Learning how compound interest works and how they can continue lying on the couch and actually earn more money, can be a big motivator to get them to earn and save more and more.
Help with weekly budget
Years ago I met with a family who had a unique idea of teaching the kids how to budget. They would give their teenagers a certain amount of money (then it was around 500nis) and put them in charge of weekly food shopping. They would have to decide among themselves what the family needed and then figure out how much it cost. Needless to say the first few weeks they had a lot of Fruity Pebbles and ice cream, and they never had enough money left for all the basics. Then they figured it out, and started shopping more wisely and started getting their fruit intake from more natural sources.
If you have good tips to teach teens smart money habits, feel free to email me.
Happy 16th MAK!
The information contained in this article reflects the opinion of the author and not necessarily the opinion of Portfolio Resources Group, Inc. or its affiliates.
Aaron Katsman is author of the book Retirement GPS: How to Navigate Your Way to A Secure Financial Future with Global Investing (McGraw-Hill), and is a licensed financial professional both in the United States and Israel, and helps people who open investment accounts in the United States. Securities are offered through Portfolio Resources Group, Inc. (www.prginc.net). Member FINRA, SIPC, MSRB, FSI. For more information, call (02) 624-0995 visit www.aaronkatsman.com or email aaron@lighthousecapital.co.il.
