Not interested in supporting your kid into their 30s? Teach them to be smart with their money now and it may be them supporting you in the future.
By Duke Coleman
LIFE IS EXPENSIVE. The food. The clothes. The entertainment. The bills never seem to pile up faster than we can get to the ATM. Soon our teens are going to have to shoulder these expenses on their own. Will yours be ready to balance his books when the time comes? If he’s more willing to dole out for a new car than pay off his student loan, it may be time to take
action for the sake of his fiscal future. These tips can turn even the most eager spender into a money-smart investor.
TEACH THE BASICS
Teenagers live in an unbalanced economy, which means they need to save and invest in order to live financially healthy lives.
Based on the Economic Law of Money Saving, if a person does not do either of these things, she is more likely to end up
poor. Not surprisingly, making smart financial decisions early in life is highly likely to lead to financial stability. When she is
ready, teach your kid about investment and tax-avoidance strategies (include topics such as RSPs, 401Ks, IRAs, Roth IRAs, Life Insurance, Real Estate, stock markets, ETFs and bonds). You should also expose her to the world of licensed investment advisers (such as wealth managers and financial advisers) who are trained to help others make smart decisions with their money.
UNDERSTAND THE FLOW OF MONEY
The government has to continuously print money due to the unbalanced economy. This means, as long as your teen is able to
get and keep a job, she will have money available to save in the future. This means she can enter into future investments such
as buying a home, or stocks and bonds. She can also count on this money-printing to happen for sure, so can be confident in
making investments that will grow in money value because no one is going to stop the cause of needing to print more money (i.e., stop the Unbalance Money Economy).
The idea is to help your teen think naturally in terms of money flowing in and out of his life.
There’s no shortage of people, businesses, education and government departments willing to help kids get the money they
need—be it for university, a start-up company or their first apartment. Make sure your child is aware of the processes and
requirements of these resources so he isn’t shocked if and when he needs to pay it back in the future. Expose him to each option and give him time to think about how they fit into his dreams. For example, large businesses may be willing to pay for his college education if he works for them and goes to college for degrees they support (e.g., engineering). My company paid for most of my undergraduate and all of my master’s degree in mechanical engineering. On the government side, he can also apply for many different grant funding sources that never need to be paid back if he does well in school. The more you help your child find what method suits him, the better his chances to achieve his goals.
DRAW UP A PLAN
Sit down with your teen and have her write up a simple short-term (one to five year) and long-term (five to 10 year) financial
plan. Make sure she’s prepared to alter her plans as surprises crop up and few well-laid ideas work out exactly as we expect.
Life is filled with changes and we all need to be prepared to adjust and accept the journey. Think of these modifications as new and different chapters in the book of life. Help your teen to design a plan of what she wants to do, encourage her to try her plan and to enjoy and learn from her accomplishments (or failures). No matter the outcome, your teen will learn from each experience and become smarter with each lesson.
“There’s no shortage of people, businesses, education and government departments willing to help kids get the money they need.”
HELP YOUR KID TO PREDICT HIS FINANCIAL FUTURE
Provide your teen with forecasting tools (anything from a pencil and paper to an Excel spreadsheet). Start with very simple
plans, such as balancing a chequebook, adding in the money coming in each week, subtracting the money going out and then
calculating how much he’s saved. Make the plans relevant to his life. For instance, begin with his weekly allowance or income
if he has a job. Then, try to explain your own financial plan in a simple way. Show him approximately how much money you
take in each month and how much you need to send out. Over time, show him how his outgoing list, which is short when he is young (his expenses are likely limited to things like food, games and clothes) grows as he takes on more responsibilities (i.e. water, cable and electricity bills) and owns his own house (now he has to factor in mortgage payments and insurance on top of his monthly bills). Let him create more complex plans as he understands more complicated mathematics such as compound interest and inflation. The idea is to help your teen to think naturally in terms of money flowing in and out of his life.
Raising a money-smart teen is fairly simple, but it takes love, patience, kindness, education and skill. Show your teen she is loved through actions and words. Listen to her desires and help her reach for her dreams. Give her time to process your suggestions until they line up with her own passion. Once she’s decided on a plan, encourage her to always make progress towards her goal—no matter how small it may seem at the time. It all adds up. ■
Duke Coleman is a senior level mechanical engineer in the aerospace industry and the author of Money Smart Children
Learn the “Economic Law of Money Saving.”