Ages 14-18 – The Pressures of the High School Years
Welcome to the tough years. Here are 10 ways to help your high schooler cope with the financial demands of being a teenager. These are the last four years before your child begins to live an "independent" life that does not include parental guidance in money matters. Each link brings you to a short paragraph.
Curb the desire to spend
Impressionable and vulnerable, targeted by advertisers and under peer pressure, teens have a tough time. Companies touting snack foods, clothing, movies, video games, and computers will be positioning their product as a "must-have." Counter these messages by continuing the lessons you started early and have been reinforcing since your child was very young.
Credit and consuming
Using credit cards is a lesson best learned at home, where you can guide your teen and help the young person through mistakes. To begin, explain the pros and cons of credit. Most teens don't know that it's borrowing. Credit is convenient and can be a wise way to finance purchases. But warn your teen about the costly dangers of debt. Together, read a credit-card statement, and show your teen how many small purchases can add up over a month. Point out interest rates (and their totals) as well as penalties for late payments.
You can introduce your teen to using credit with a low-limit joint credit card: you cosign for a card in your teen's name. You cap the amount to match the portion of allowance that you and your teen have agreed to. Your teen is totally responsible for the bills – which must be paid IN FULL each month. This is the crux of the exercise. Review monthly statements with your child. Do NOT help your child out of debt. If your teen overspends one month, he loses spending privileges until the debt is paid in full.
You can also tie a credit card to a teen's saving account, which means the limit on the card equals the amount in the savings account. The risk and consequences of overspending is serious in this arrangement. Kids can not only wipe out their savings early, once savings are gone, the teen no longer has a card to practice with.
Investigate the world of "stored-value" debit cards. Not linked to bank accounts, these cards are pre-paid or pre-loaded with a fixed amount. When the card is "empty" the spending is over. A teen can load the card with a portion of allowance based on an agreement with parents. Some cards offer parental controls to block certain kinds of merchants.
Both parents and kids can monitor expenditures online, so parents know how the card is being used. These cards charge fees, but they are a way to introduce your child to the swipe-and-spend world of purchases. It's a lesson better learned at home in small amounts than on the college campus or the work world, where the consequences can be more serious.
What do teens need with a checkbook? To learn to deal responsibly with money and to learn that it is not a limitless resource. Who taught you to write checks and balance a check register - or did you figure it out all on your own? For help teaching your teen these lessons, see Writing A Check and Using a Check Register, both in the Tracking section under the Fun for Kids tab.
Help teens get used to writing checks and keeping track of the money in their checking accounts while at home. If you go over bank statements with teens, they can benefit from your experience and guidance. If teens bounce a few checks at home, they may learn their lesson before they leave the nest and get into real trouble.
Look into college scholarship/grants
Help your teen identify some of the opportunities for funding college. From academic to athletic scholarships to grants and loans, hundreds of programs are available, but high schoolers have to apply and qualify. Freshman year is the time to start planning to qualify.
Rewards of being financially fit
Yes, remaining financially disciplined is difficult for a teen. But don't forget to show your child that money in savings can buy enjoyment – talk about how parents' savings can buy a special prom dress or a yearly family vacation. Explain that these treats are the rewards of leading a financially fit life.
Lead by example
Continue to model good spending habits for your child. Pay cash for items or "save up" before you buy. Invite your child to help you research large purchases, compare brands, features, and prices.
Teens and financial troubles
If your teen is broke and suffering because of it, the discomfort will eventually teach him or her to spend more wisely. Don't let your teen dip into savings or investments to cover the shortfall. Don't "cave in" and advance or lend money: bailing out your child destroys the lesson that the child has created for him/herself.
Keep work in perspective
Teens who have too many desires as consumers will sacrifice time spent learning for time spent working instead. Educators recommend that high school students work on weekends and during summers. During the school year, teens need time to be students, not employees. Often students avoid less demanding college prep courses, instead, they take "easier" courses to lessen the demand that school puts on their work time. It's a big mistake that costs them in college.
Save for college
This is a time when teens should focus on saving. College expenses are right around the corner. Your child should contribute a part of his earnings, even if it's only to accumulate spending money while at college.