Teach Your Teens
Don’t let them fly the coop before learning these important money lessons.
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By Sarah Watts, illustration by A. Richard Allen
You’ve taught them to drive. You’ve shared your values and Christian beliefs. But how much time have you spent teaching your kids about sharing, saving and spending?
Financial experts agree that teaching teenagers about money gives them confidence to manage their finances as an adult. Here are some of the money smarts parents should cover before their kids fly the coop:
1. Start a savings account.
Jan and Arturo Cuadra, of Los Angeles, used a simple concept to teach their daughters, Jessica and Jennifer, to save. Inspired by Thrivent Financial representative Bret Wims, the Cuadras taught their children what they call the “10-10-80” rule when they were young. They give 10 percent of their money to God, put 10 percent in savings and live off the rest. “It got them to think long-term and planted a seed in their minds about the importance of saving—and tithing,” Jan says.
2. Invest in the stock market.
For Wims, who is based in Santa Clarita, California, teaching your children how to grow their money is just as important as teaching them how to spend and save. “If they want to save for long-term goals or retirement someday, they’ll have to know how the stock market works,” he says. Oftentimes, his younger clients perk up when they hear about how saving a small amount of money now can pay huge returns later in life. “I’ll do a calculation in front of them and say that if they save $100 a month for 38 years, they could have, with interest, several hundred thousand dollars when it’s time to retire,” Wims says. “It’s so much fun to see the lightbulb go off in their heads that investing is important.”
3. Understand how credit works.
Wims helped his own children open credit accounts to teach them about the importance of establishing credit. He explained that credit affects their ability to buy auto insurance, rent an apartment or even purchase a cellphone plan.
The Cuadra family also has taught their now college-aged daughters to use credit wisely. “We’ve approached the subject as, yes, you want to have credit, but you also want to live within your means,” Arturo says. Jennifer and Jessica Cuadra both have credit cards. They use them for necessary purchases and pay off the balance every month in full.
4. Create (and stick to) a budget.
Creating a budget can be tricky since most college-bound kids don’t have many expenses to begin with. Jeff and Shannon Kulp, from Santa Clarita, know this, so they have taken steps to teach their three sons budgeting. They require their sons to pay for their gas, cellphones and some of their discretionary expenses, like haircuts. “When they’re in school full time, we support them close to 100 percent,” Jeff says. “But they know that once they graduate, they’ll be expected to pay for everything.”
5. Give generously.
As Christians, the Kulps have taught their children to be generous givers. “My kids know that we tithe and they think of it as a given, just something that we’re expected to do,” Jeff says. Like he and his wife, the Kulp children give 10 percent of their earnings to their local church as an act of faith and an acknowledgment of their many blessings. “God was able to provide for them and us as parents, and we’re very blessed. I hope that’s what they’ve learned,” says Jeff.
Have the Money Talk
Teens may roll their eyes if you bring up your family’s finances, but talking about it is still worthwhile. To pique their interest, Wims recommends finding ways to make money relate to them personally.
“I sit down with my clients and discuss long-term and short-term goals. What do they want their lives to look like in one year or in five years? This often leads to a lot of other conversations,” Wims says.
For Jeff Kulp, the key to having money conversations with your kid is just that: You need to have them. “If you put it off or procrastinate, it can get awkward. Have the conversation, and have it early,” he says.
In addition to talking, parents should model how to use money wisely, Jan Cuadra says. “Especially at a young age, sometimes it’s more about actions than it is about words,” Jan says. “If you’re not sure what to say to your kids, just be the role model that they need.”
Consider Power of Attorney
Once your children turn 18, they are legally independent in most states. But that doesn’t mean they may not need help down the line. When a child turns 18, some parents have them sign a form to give the parents durable power of attorney. This document can vary from state to state, but it may allow them to make financial, legal and tax decisions on their child’s behalf should the child become unable to make them on their own. (This is different from an advanced medical directive, also known as health care power of attorney, which enables a third party, such as a parent, to make medical decisions on someone's behalf, such as an adult child.) In the case of an adult child, parents who have durable power of attorney may be able to file tax returns, pay bills and even renew car registration for their child if they are in an accident, fall ill or are otherwise unable to do so.
If you have access to your child’s bank account and your name is on the account, durable power of attorney may be unnecessary. To determine what’s best for your family, talk to your attorney.
Thrivent and its respective representatives and employees cannot provide legal, accounting, or tax advice or services. Work with your Thrivent Financial representative and, as appropriate, your attorney and tax professional for additional information.
Help your teen take the next step
- Check with your financial representative to see if a Parents, Teens and Money Matters® Workshop is planned in your area. Teens receive the Cash Cache® personal finance organizer, designed with pockets for sharing, saving, spending and investing to help them keep track of their money. Parents receive a discussion guide with exercises and discussion topics to keep the money conversation going.
- Thrivent Federal Credit Union can help students establish good spending habits and build their credit with a Thrivent Rewards Checking account, including a line of credit of up to $500. For convenience, the line of credit features free withdrawals for students at ATMs on campus.
Deposit and lending services are offered by Thrivent Federal Credit Union, a member-owned not-for-profit financial cooperative that is federally insured by the National Credit Union Administration and doing business in accordance with the Federal Fair Lending Laws. Must qualify for membership. Insurance, securities, investment advisory and trust and investment management accounts and services offered by Thrivent, the marketing name for Thrivent Financial for Lutherans, or its affiliates are not deposits or obligations of Thrivent Federal Credit Union, are not guaranteed by Thrivent Federal Credit Union or any bank, are not insured by the NCUA, FDIC or any other federal government agency, and involve investment risk, including possible loss of the principal amount invested.
Sarah Watts is a freelance writer and content strategist based in the Chicago suburbs.
Hypothetical example is for illustrative purposes only. It is not intended to represent the performance of any particular Thrivent Financial product, nor does it take into consideration any product expenses, such as fees or sales charges. The results would be reduced if they were included.
Securities and investment advisory services are offered through Thrivent Investment Management Inc., 625 Fourth Ave. S., Minneapolis, MN 55415, a FINRA and SIPC member and a wholly owned subsidiary of Thrivent, the marketing name for Thrivent Financial for Lutherans, Appleton, WI. Thrivent Financial representatives are registered representatives of Thrivent Investment Management Inc. For additional important information, visit Thrivent.com/disclosures.
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