Back in your parents’ day, people learned to be satisfied with what they had and to save for a rainy day. The ongoing financial crisis is teaching some of those lessons all over again. But today’s world is different, and there are new lessons that you should teach your kids about money.
Related article: 7 Hands-on Ways to Teach Kids the Value of Money
These tips will serve them well as they grow up and head off to college.
1. Few Things in Life Are Free
Even if your family is well off, you are doing your kids a disservice if you give them everything they want, just because they want it. Instant gratification almost never happens the real world.
2. Start Saving Now, Not Later
If your teen saves just $100 every year beginning at age 14, by the time he or she reaches age 65, those savings would have multiplied to reach $23,000, assuming a steady rate of 5 percent interest each year.
The sooner your child understands how compound interest works, the more money he or she could potentially save.
3. Waste Not, Want Not
You don’t want to turn your kid into a money hoarder, but standing by without commenting while he blows $50 on a video game that he only plays once does not make you a “cool” parent.
Once your child grows up, and $50 balloons into thousands, he or she could find it impossible to pay rent or a car note. Best to nip the wasteful spending habit in the bud.
4. Credit Cards Are Not Play Money
They’re plastic. They’re colorful. You can get cool things with them even when you’re broke. No wonder so many people look at credit cards like Monopoly money.
But when the bills come in, credit card debt starts to get real. Teach your kids that credit cards are actually plastic loans that must be repaid to help them avoid credit card debt as adults.
5. Money Does Not Grow on Trees
Unless you have a trust fund or inherited wealth, you have to work to earn your money. Your kids are not too young to learn the same lesson. Use a chore system to teach your kids how earning money works, and when they’re old enough, make sure they get a job.
6. Saving Money Isn’t Everything
Saving money and living frugally is an awesome habit to develop. But kids also need to know that skimping to save a few bucks now could come back to haunt them later. For example, buying low quality items, like cheap sneakers and jeans, often means replacing them more often.
Even more relevant are store credit cards that will no doubt tempt your teen as soon as they start shopping at malls on their own.
Use this as a lesson. Take your teen shopping with you this holiday season, and when you refuse the cashier’s offer for 15% off your order if you sign up for their store card, explain to your son or daughter why. Fifteen percent off now, probably no more than a few bucks, isn’t a good deal if that means putting it on a credit card that 1. Has high interest and fees, 2. Might damage your credit rating, and 3. Earns you no benefits, points, or discounts in the long run.
7. Distinguish Between Wants and Needs
They need new clothes, equipment for school sports, and new school supplies. But they also want a new XBox, the latest iPhone, and money to go out with their friends. Teach your kids to take care of needs first, and they will be more likely to have money to pay for their wants.
8. If It Sounds Too Good to Be True, It Probably Is
It shines! It sparkles! It is the hottest new “something” on the market! Products that make outrageous claims nearly always fail to live up to the hype. Teach your kids that very few things are as good as they seem, and flashy marketing is just that–marketing.
9. Money Cannot Buy Happiness (or Friends)
With shows like Pretty Little Liars and the Vampire Diaries on every teen’s must watch list, young teens tend to think that if they had a bit more money, they might be more popular. Or, they might lead more mysterious lives full of intrigue and danger.
Of course they know that this is simply not true, but they’re probably still jealous of the cool kids. Remind them that no matter how popular you are, or how many things you can afford to buy, real friends and real happiness doesn’t come with a price tag.
10. Save, Cut and Earn Before You Borrow
Everyone gets into a financial jam now and then. Payday loan companies may create the impression that quick money is the solution. You should teach your kids that it is almost always better to cut back on expenses or try to earn extra money before resorting to borrowing money.
11. Advertising Is Not the Same as Reality
Every day, teens are bombarded with commercials and ads. In some cases, the ads are entertaining, but entertainment is not the same as fact. Teach your kids to look at ads with a skeptical eye, even if they enjoy seeing them.
12. Budgeting Is a Necessity
Setting aside money for groceries, gas for the car and your mortgage isn’t the most thrilling way to spend an evening, but it’s the best way to ensure that your bills are covered. Take your kids grocery shopping or let them watch you sort your bills into categories. Teach them that budgeting allows them to do the things they want and need while staying within their financial means.
13. Shop Around For the Best Price
There is no need for kids to watch you drive all over town to save a few cents per gallon for gas. But comparing labels and prices as you make buying decisions is an important lesson for them to learn.
Just because something costs more doesn’t make it better, so the next time your teen wants a new laptop, make sure they check several stores. Have them look online do a few price checks before settling for the first thing they see. To make it easy, download one or two price comparison apps, like PriceGrabber, to make price-checking even simpler.
14. Uncle Sam Demands His Share
Death and taxes – there is no escaping either one. When your teen begins earning paychecks, she might be annoyed that deductions are taken for Social Security, Medicare and income taxes. Explain that taxes are a necessary means for the government to pay for the services it provides.
15. What’s Worth Having Is Worth Taking Care Of
This lesson is best learned by letting your teen earn the money to pay for the really important stuff they want. If they have to work a job to pay for a new iPhone, it’s unlikely that they won’t get a case for it, a screen protector, and keep it safe from drops. But even if they don’t, it’s important to teach them that anything, be it a good pair of shoes or a new gaming console, can last for a long time if it’s well taken care of.
Lead by example–show your son an heirloom timepiece that you’ve taken care of for years, or how long a car can last if it’s maintained regularly.
16. A Little Charity Goes A Long Way
Earning money can be rewarding, spending money can be fun and saving money can be prudent. But sharing money and other resources when you are able makes you more complete as a human being. Teach your children that charity truly begins at home by allowing them to pay it forward through donations to causes they care about.
17. Money Is a Tool, Not an End
Economists call money a fungible good, which means that money only has value when it is used for some purpose. You can’t eat money – but you can use it to buy food. Teach your kids this lesson to help them avoid turning into money hoarders, or extreme penny-pinchers.
18. Celebrities Aren’t The Only Ones Getting “Leaked”
Facebook. Instagram. Pinterest. These services are “free” because their owners make tons of money selling information and allowing access to their membership by marketers. Facebook actually pays people if they manage to hack the platform.
Teach your kids to guard their personal information from identity thieves and other bad guys. They don’t have to give up social media, but celebrities aren’t the only ones being targeted.
19. Cooking Is Cheaper (and Healthier!) Than Take-Out
The very last thing you want to do after a long day is think about preparing dinner. But for the same $20 you spend on pizza, you could purchase several days’ worth of groceries. Teach your kids how to prepare simple meals that they can freeze and thaw while giving their wallets a break.
20. Don’t Fall into the Student Loan Debt Trap
This one is tricky–not every kid wants to go to college, or even qualifies for financial aid. But it’s important to teach kids that even if they’re offered, student loans aren’t free money, and they aren’t the only way to pay for an education.
As soon as they say “I want to be a [doctor, teacher, artist] when I grow up,” start up a college fund and save money for them. When they’re old enough to really mean that they want to go to college, let them help with their own college savings. Teach them that loans should only be used as a last resort, and as long as they can get a job, apply for scholarships and grants, and “pay as they go” through college, they can get an education. Don’t scare them, but it wouldn’t hurt to show them a few statistics on student loan debt, and how long it takes most people to pay it off.
And the value of going to a more affordable, local college can’t be stressed enough. Advise them that a good education isn’t necessarily tied to a big name university with a high tuition, but in how you use what you learn.
Related article: Don’t Get Buried in Student Loan Debt
While personal finance education is steadily growing in schools, there’s no debating that kids learn most of their money habits in the home. If you’re constantly in debt, spending frivolously and keeping up with the Joneses, you kids will carry those traits into adulthood. If you have good habits, earning money and saving up for the things you need and want, your kids will likely do the same. Change the way your teen thinks about money now, before they leave the nest and head out on their own.
Audrey Henderson is a Chicagoland-based writer and researcher. She holds advanced degrees in sociology and law from Northwestern University. Her writing specialties are sustainable development in the built environment, policy related to arts and popular culture, socially and ecologically responsible travel, civic tech and personal finance.