Using a Gradual Approach

A 2008 Charles Schwab Parents and Money survey found that 69% of parents feel less prepared to give their teen advice and guidance about investing than they do about sex.

Relax; you don’t have to address everything money-related with your teen. For now, just cover the basics.

“First of all, understanding the value of a dollar, using it wisely, and budgeting is critical for every young person,” says Carrie Schwab Pomerantz, chief strategist of consumer education at Charles Schwab & Co., Inc. “The best way to teach a child about budgeting is by giving them an allowance at a young age,” she says.

“You have to have a conversation…about how the allowance is to be spent,” Schwab Pomerantz says. You can suggest your teen use her allowance for some of the items you normally purchase – like shampoo, haircuts, and movies. They can also appropriate some as “fun money” and some as savings for a big-ticket item, like a new car or contributions to their college fund.

 

Giving Teens Their Own Accounts to Manage

A good way to get your teen in the habit of budgeting and spending wisely is to open their own checking and savings accounts with you as a joint or custodial account holder.

Grady, for example, says that getting bank accounts have helped keep his spending from going overboard. “I try to watch what I’m spending and actually look and see how much I have in the bank,” he says. Before, he would just spend until he was broke, and not know where his money went.

Another must-know topic is credit. “Learning about a credit card is vitally important today, in particular with the amount of debt in our country, and the number of bankruptcies,” Schwab Pomerantz says. “Kids [can] practice using a credit card with a low balance, paying it off on a monthly basis, understanding the fees and penalties that go along with it if you don’t pay it off, and understanding how interest can accrue so quickly,” she says.

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Issue: May 2008