A variety of experts will tell you a variety of things about how to teach high-schoolers about money, and some of those opinions conflict. Money and adolescence are both awkward and controversial topics for many people, so it’s not surprising that an intersection between the two makes for murky waters. Despite the controversy and confusion, most experts agree on a handful of tenets.
They Need an Income
Adults earn and spend an income, so your high schooler needs one to learn with. This can come from a part-time job, an allowance, a small business, or some other source — but without an income, he can’t prepare for financial adulthood.
They Need (Low) Risks
Your high-schooler must have the chance to make mistakes with her money, even painful mistakes. From high-ticket, but disappointing, purchases to loaning cash to the wrong friend, making these inevitable mistakes with a safety net beats making them out on their own.
They Need Adult Responsibilities
Practice paying bills on time is the only way to develop that habit. This can be gas for the family car, deposits in a college savings account or some other artificial, but non-negotiable, bill. Some families even pay a high allowance, but charge their high-schooler for rent, utilities and food.
They Need to Invest
Learning about investing, using real money and real stocks, serves two purposes for high-schoolers. First, they get an introduction to the idea of letting your money work for you. Second, early investments and savings earn big interest in the decades before retirement. Investment accounts can be one of the bills your child must meet each month.
They Need Credit
Credit is a useful tool and a terrible master…and an insidious trap for young adults. A small loan or student credit card — especially compared to the performance of investments — can teach these lessons at a low balance and interest. It beats learning about the hazards of credit at adult limit levels.
They Need Trust
If you micromanage your high-schooler’s finances, the only lesson she’ll learn is that you’re pretty smart about money. She won’t learn how to make smart fiscal decisions on her own. Even though it can be painful to watch, it’s important to step back and let your child experiment with her income. It’s the only way to prepare her for the financial responsibilities of their impending adulthood.