You thought there would be more time. But your oldest just finished driver’s ed and wants to buy a car. You don’t even get to the cost of insurance part of your argument when you realize you’d lost him at interest rate.
Your straight “A” student can barely make change. What happened? Blame invisible money. When Generation X was in high school their parents were getting bills in the mail, balancing checkbooks and driving to the mall for clothes and household goods. This gave mom and dad an abundance of material to discuss budgeting, savings and debt.
By the time they had children, Generation X had moved their finances and shopping online. Consequently, their kids rarely saw their parents buying products with cash. Nor did they see them sort through an envelope of cancelled checks to reconcile the bank account. So, the idea of money has been largely abstract and unlimited.
It’s time to get real, real quick. Start by seizing these teachable moments.
Mobile Phone: Your phone bill is a great place to start. If you pay online, print out a copy of the last quarter’s statements. Review with your child the assorted line items—monthly service fee, local usage, roaming charges, data package, taxes and other costs. Most plans offer online tools to track use and trends. Once your child is familiar with the expenses, give them access to your online account and challenge them to find ways to save on your plan.
Allowance: An allowance provides an opportunity to teach kids about budgeting, savings and more. Establish a regular payment schedule, weekly, biweekly, etc. based on your child’s age. Generally speaking, the older the child, the longer the payment cycle will be. On payday, use the time to chat with them about their plans for the money. Ask about upcoming social events where they may need pocket money. Talk about big purchases (like a car) and consider matching savings to encourage positive personal financial habits, like delayed gratification, and wants versus needs.
College Planning: If your child wants to attend college, don’t wait for the application process to discuss funding. Have him research the top three schools where he’d like to attend. The high school counseling office can be a great resource here. Have him create a budget or leverage an existing online tool. Many universities have calculators and budget forms. In addition to tuition, room and board and books, make sure he includes entertainment, transportation and other recurring costs. This exercise can provide a foundation for discussions about financing options—student loans and grants—as well as career planning, budgeting and more.