The Bank of Mom & Dad has a Limit.
Teaching teens about money is like …
You are not alone.
When I survey my students about their spending habits, 90% of them blow their money on food. The reasons are: food provides instant gratification; it is lunch and something to do; their friends' are getting lunch so they join and get something too.
These spending challenges are not foreign to us as adults. We also struggle with our spending when it comes to instant gratification, boredom and something fun to do with friends and family.
The trick is to connect with teens on a deeper level. Right now they don't have any incentives or motivation to do something different with their money. Most teens know money will play a role in their future but their future and money is still very abstract. We need to take the abstract and make it concrete. Here is how:
Value of Money Bundle:
Housing, Cars & Food
Housing: When your teen moves out, where do they want to live?
In this activity, teens will calculate their take home pay and find housing in their desired city. With salaries ranging from $35,000-$150,000, students will deduct the 30% they will lose to taxes. Of their take home pay, housing should be no more than 30%. With these numbers, teens head out to see what each salary will buy in their desired city.
Cars: Dream, Mid Level, Cheapest. What does it all cost?
Teens will pick out 3 levels of cars and calculate the monthly payment. Don't forget the taxes and registration!
Food! Eating out vs cooking. How much does it cost to feed yourself and what are you going to eat when you are out on your own?
Dream Budget: Bringing it all together!
Now that teens have the expenses for the 3 biggest spending categories, they are going to bring it all together in their Dream Budget. They will also fill in other budget categories by doing a brief amount of research or using personal experience. This budget includes taxes and gives students the salary they would need to make to support this ideal lifestyle.
Starting Salary Budget: Back to reality! Yeah, it hurts.
The goal of these activities is to make the role money will play in their lives more concrete. It is fun to look at housing, dream cars and food(?). The reality is most teens will not be making the salary for their Dream Budget right away. So it is time to bring them back to reality with this final budgeting activity.
In this activity, teens will be working with a starting salary of $55,000. Their budget will automatically have taxes taken out, forced savings and investing and their 30% allowance for housing. In this budget they are going to have to make cuts to make it all work and live within their means. Most teens do not find this activity very fun but it is a necessary part of making money and the role it will play in their lives very real.
The cool part: these activities work and each activity comes with video instructions from me! These activities also make for great family discussions and sharing.
Once teens understand the role money will play in their lives, it is time to give them the 4 easy money moves that will ignite their dreams. Now they are motivated to make that Dream Budget a reality and these money moves will put them on that path.
Disclaimer: I am an educator, not your personal financial advisor. Please make sure to do your own research before moving forward with any actions discussed in this blog post.
Know that all investments involve some form of risk and there is no guarantee that you will be successful in making, saving, or investing money; nor is there any guarantee that you won't experience any loss when investing. Always remember to make smart decisions and do your own research!