Money milestones – how to talk to teenagers about money

Just like life milestones as we grow up – first steps, the first day of school, first high school crush – we also have money milestones. The gold coin in the bottom of the glass from the tooth fairy, pocket money for household chores, that first pay packet from a casual job. There are many money milestones we experience as we grow up, meaning it is never too early to start learning about money and finances.

The Financial Planning Association (FPA) of Australia says talking to children about money better prepares them for the future, however, through the FPA’s ‘Share the Dream’ report from 2018 some two-thirds of Australian parents are reluctant to chat with their kids about money for fear they will worry.

Normalising regular conversations with children about money, budgeting and spending can help alleviate these worries.

We’ve put together some handy tips on how parents can talk to their children, especially employed teenagers, about finances and savings, as well, as some great ideas that could help prevent bad spending habits into adulthood.

Create a budget
A budget is a clear road map for your money – it tells you where your incoming finances need to go and what money you have left for other spending.
A budget doesn’t need to be anything fancy, something simple such as an Excel spreadsheet showing ‘Money In’ (how much money you have coming in) and ‘Money Out’ (what you are going to spend your money on) is sufficient.
Budgeting can start at any age, with FPA’s ‘Share the Dream report showing that Australian children can be exposed to pocket money from as young as four years of age. According to the report young Australian children, aged four to eight years, receive on average $10 or less pocket money per week. This increases to $20 for tweens, and up to, and more than, $40 a week for 14 to 18-year-olds.
It’s their money, not yours
Encourage the first steps to financial independence by having positive conversations about money with your children. Remember, it’s their money, not yours. Chat to kids about what they would like to do with their money, versus what mum and dad want to happen with the money. After having these conversations work together on setting some mini goals for them. It’s always best to allow for some splurge money, as well as some money that will reach a long-term goal.
Account set up
Include your children in the bank account set-up process, this helps with making money and finances real. Ensure that the bank account set up has zero fees attached – and talk to your children about the significance of this, it all helps with shaping their long-term views and values towards banking and finances.
Once the account is set up, encourage your children to have different accounts, which can help with short and long-term money goals. A good starting point is to have a ‘splurge’, ‘savings’ and ‘everyday’ account.
Don’t spend money you don’t have
Don’t encourage Afterpay, Zip or pay-later accounts. The rise of the modern-day layby through shop now and pay later businesses can be tempting for anyone. However, encouraging children to spend only the money they have is the safest way to ensure healthy and positive spending habits as they get older. As mentioned previously, having a tangible budget spreadsheet and separating bank accounts into ‘savings’ and ‘spending’ accounts will help show children exactly how much money they have, how much they can spend today and how close they are to reaching savings goals. Saving up and buying something outright is a much more responsible and rewarding process than having something today and falling into debt tomorrow.
Follow the leader
As the parent, set a good example with money and banking habits. If you don’t want your child to use Afterpay, don’t then buy that KitchenAid you have been wanting on Afterpay. Openly tell your children every time you forgo something and put money in savings for that big-ticket item you are saving for – “I am not going to buy that chocolate bar at the register today, instead I am going to save that money for the KitchenAid I really want”. Also, talk to your children about how you have saved for things in the past – how did you get your first car? How long did it take to save for your mortgage? Even consider saving for something together.
More helpful hints
Some great resources to help both parents and teens with money, budgeting, finances and savings are:

Books

I Will Teach You To Be Rich by Ramit Sethi
The Early Investor by Michael W Zisa
I Want More Pizza by Steve Burkholder
Rich Dad Poor Dad for Teenagers by Robert T Kiyosaki

Web

ABC: Teaching kids and teens about money management skills
ABC: Teens take control of the family budget for a month
Government: How to budget and save