We all remember that awkward “Birds and the Bees” conversation. But maybe it’s time parents had a different kind of “talk” with their teenagers — one like “What is Money?”
Money, of course, is currency that can be exchanged for goods and services. But tell that to our teens, addled by Kardashian materialism and the ready availability of Mom’s Visa.
Listen to this: A quarter of U.S. teens don’t know the difference between debit and credit, according to a new survey by ING DIRECT USA. The bank polled 12- to 17-year-olds and their parents about their spending and saving habits.
One in four of the teen participants thought using a debit card was borrowing money from the bank, rather than spending their own.
Only 17 percent of teens said they “knew a lot” about managing money.
That may not be surprising, considering that less than a third of parents considered themselves excellent financial role models.
“A lot of parents aren’t in the best financial situation,” Paul Richard, executive director of the Institute of Consumer Financial Education, told me. (In this recession, that’s not exactly a shock.)
So parents don’t feel qualified to teach their children about money, Richard said. “Others falsely conclude that [their teens] are getting educated on finances at school.”
But with school out and many teens working their first part-time jobs, experts say there’s no better time than now to spell out the truth about money.
And by “truth” we mean “reality check.”
“I encourage parents to have a ‘Welcome to Planet Earth’ talk,” says Neale Godfrey. She’s the chairwoman of the Children’s Financial Network, Inc. and a published author on the topic.
She suggests opening up to your teen about your own situation — show them what you earn, how much you spend on everyday living expenses (food, mortgage, utilities). And, more importantly, how much you spend on them.
That might mean showing your credit card and bank statements — something that isn’t always comfortable. But sharing your challenges could put their own into perspective.
“It’s not enough to tell them you can’t afford something,” Godfrey says. “You have to show them why.”
For parents who aren’t keen on sharing all that information, Paul Richard favors another approach: Tough love and the school of financial hard knocks.
“Let your teen make a spending mistake,” he says. “Then show them how it could’ve been avoided for the future.”
So when your teen saves enough money for a new gadget, can’t wait to buy it and balks at comparison shopping, Richard says to just let them go with it.
Then the next time they ask for an extra 20 bucks, you can remind of that frivolous purchase and how they could’ve saved some of their cash. Teach them how to budget and search for the best price for the future.
Godfrey and Richard agree it’s important to learn from spending mistakes while they’re still easy to fix. The key is to find a positive way of doing so. However you choose to do it, “Avoid the grinding and pounding of saying ‘I told you so’,” Richard says.