You live with a high schooler! When did this happen? How did your little one grow up so fast?
Before your teen graduates and heads out into the "real world," you want to make sure they are financially savvy.
Do they understand how a credit card works? Do they know how to pay their bills? Are they financially prepared to deal with an emergency?
If you feel like you have more wisdom to impart on your teen before you hand over the financial reigns but you're not sure where to start, don't worry. Leave it to the pros.
Read on to see what seven financial experts have to say about teaching high school-aged teens about money.
Take a holistic approach
Chelsea Brennan is a mother, National Certified Financial Education Instructor (NCFEI), and former hedge fund investment manager. Her top advice to parents: "Help your kids think about money holistically."
To do this, Brennan advises parents to "have regular conversations about the intersection of personal values and money." She believes it's important to start these conversations when your kids are young and continue to dig into this topic as they mature.
Encourage them to think about the type of companies and organizations they want their money to support. How do their spending, saving, and giving habits reflect the type of person they want to be?
"Money is heavily connected to almost everything we do," Brennan says. "Letting our kids see that and start to align their money with their values early will let them waste less money as an adult spending on the things that don't truly matter to them."
Automation is key
"When my 15-year-old daughter got her first job, I showed her how to set up direct deposit for her paycheck," says financial content creator, Kristin Stones. "After some negotiation, we agreed on her sending 40% directly to her custodial savings account and 60% to her personal checking account. Part of this agreement included her not accessing the savings account and having free rein to spend her 60% however she pleases."
Stones believes this agreement can be a good compromise for parents and teens. "I'm thrilled to watch her save 40% of her paycheck and since that 40% never shows up in her checking account, it seems to be out of sight, out of mind to her."
Stones hopes that by getting her daughter automating her savings in this manner it will teach her to live on less than she earns. More importantly, she adds, "[I'd like it] to get her comfortable with the idea of saving a substantial portion of her income."
Harness the power of compounding
Compound interest is often referred to as the eighth wonder of the world (thanks, Mark Twain!) — and, for good reason. If you start investing when you're young, the financial results can be nothing short of wondrous!
Certified Financial Planner Myriah Lipke agrees, encouraging adults to teach their kids to harness the power of compounding. "As teenagers, they have a huge advantage because they have an abundance of one of the most important assets — time."
Lipke suggests encouraging your high schooler to open a Roth IRA when they start their first job. "If they invest just $50 per month in a total stock market index fund from their teen years through retirement, they could have a cool million bucks by the time they reach retirement age."
Give them a dose of financial reality
"Have your teen pay the household bills with your money," suggests financial blogger Elizabeth Riley. She takes this hands-on financial approach with her teen for two reasons.
First, she says, "it gives my daughter a realistic idea of how much money she will need to earn each month to live comfortably. It also teaches her responsibility to make sure the bills are paid on time and in full each month."
Riley admits that she does double-check her daughter, but after the first few months, she learned to master the task on her own. “I feel confident that she will be able to take care of her finances after she moves out of the home," says the proud mom.
Create an emergency fund
"When an emergency happens, use it as a way to teach them about the importance of having an emergency fund," recommends Ben Reynolds, CEO of Sure Dividend, a company that helps investors build high-quality dividend growth portfolios. He suggests parents assist their teens in creating their own emergency fund before they go off to college or when they get their first paying job. "Show them how much you put in your emergency fund each month because it will help to reiterate that this money doesn't come out of anywhere."
Reynolds suggests teaching the value of having an emergency fund as a "financial cushion" — a tool that can help to stop your teen from going into debt. "An emergency fund can also prevent them from relying too much on credit cards when they need extra money to support their own financial emergencies," he says.
Be your own boss
According to personal finance blogger, Kelan Kline, "one of the best things you can teach your kids about money is that you don't always have to trade away your time to earn income."
To help relay this important financial message, Kline suggests parents encourage their teens to start their own businesses. And, it doesn't have to be anything complicated; she recommends something like a car wash, video editing, or lawn-mowing.
Entrepreneurship can do much more than teach your teen how to make a profit, Kline explains. "Starting a business will help them learn invaluable skills that will set them up for financial success."
Focus on the big-ticket items
If you want to teach your teen about money but feel like they're always tuning you out, financial blogger Vicki Cook advises you to "focus on the 'big-ticket' items."
Rather than trying to discuss every single spending decision, Cook suggests making sure your teen clearly understands the financing related to large purchases like cars, college, apartments, and credit cards.
"Buying a new outfit or a concert ticket here and there could hurt their budget temporarily," she points out, "but taking on tens of thousands of dollars of debt that is difficult to pay back can be life-changing."
As a parent of two financially savvy teens who are now successful twenty-somethings, Cook believes that it's important for parents to pick their financial battles. Since you can't teach your teen every financial lesson, she says the best course of action is to focus on high-impact items.
It's all about independence
When it comes to teaching your high school teen about money, promoting financial independence is another crucial tactic.
What does your teenager still need to learn to be financially savvy on their own? Do they have practice paying bills and managing their money? Have you discussed how to prepare for a financial emergency? And, do they know how to align their financial decisions with the things they value?
It's impossible to prepare your teen for every financial situation that could be. But, if you can give them some real-world practice and insight before they graduate and head off on their next adventure, then you've given them a solid financial head start!