Use Accounts With Training Wheels
In the past few years, a raft of fintech startups and established banks, brokers and credit unions have rolled out new savings, spending, budgeting and investing accounts for kids. They come with a variety of educational features and parental controls, but most are app-based and include a debit card that teens can load onto their smartphones. “Today’s youth are more likely to leave home without a wallet than without their phones,” Ziv observes.
Note that kids can’t legally open regular bank or brokerage accounts—so these are all technically parent-owned accounts, or joint accounts or old-fashioned “custodial” accounts (the money in a custodial account legally belongs to the child, and they get control at age 18 or 21). Shop around, since the features, fees and parental controls vary widely.
Also consider adding your maturing teen as an authorized user to one of your credit cards—it can help them to build both experience using a card responsibly and a credit history. That history could help them later, as a young adult, to qualify for their own credit card, car loan or mortgage. Personal finance talks should be ongoing, Ziv says. A monthly discussion about what’s on the credit card bill is one way to pick up the conversation—along with a lesson on the importance of paying off that balance each month.
Add your teen
as an authorized
user to your credit card—it can help them build both experience using a card responsibly and a credit history.
Talk (And Model) Money Values
Broaden the financial conversation with your kids to include what money can and can’t do for you—and for others. Lan Nguyen Chaplin, an associate professor of marketing at the University of Illinois at Chicago who has studied kids and materialism for two decades, says parents who give children everything they ask for or pay them cash for A’s in school may unintentionally be setting them up to feel like they never have enough, or that money defines their value as people. Little actions can send a big message. Example: The professor and her husband make it a point not to upgrade their cellphones every time a new model comes out to show their two teenagers that you can be happy without the latest, most expensive gear. “By focusing on what you have, the abundance becomes so clear, you’re not yearning toward what you don’t have,’’ says Chaplin, who is moving to Northwestern University in June.
Modeling responsible financial behavior is crucial. You can lecture all you want about the dangers of spending money you don’t have and then undercut your message when the kids see you paying a high interest rate on a credit card balance you ran up buying something you didn’t need. “Are they going to listen to what you’re saying or take a cue from your actions?’’ Ziv asks.
You can also demonstrate the importance of sharing your good fortune through family participation in charitable giving and volunteer work. Having grown up relying on hand-me-downs from strangers, Chaplin now volunteers every summer with her children and students at a charity that collects and sorts goods for families in need. “When you donate, you need to be thoughtful,” she says.
You can
lecture all you want, but modeling responsible financial behavior is crucial.