More than a third of parents say they don’t discuss money with their children at all.

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When it comes to talking to your teen, some conversations are more difficult than others. Ultimately, you know that sitting down and having the hard talks are worthwhile because you want your teen to be prepared for the challenges of growing up, like sex, alcohol, drugs and bullying. There’s one talk, though, that a lot of parents aren’t having with their teen: the money talk.

Many adults feel uncomfortable discussing money with other adults, and many may not feel they  have enough financial knowledge to provide guidance to someone else. According to a 2015 study, more than a third of parents say they don’t discuss money with their children at all, while 84 percent of teens say they want to learn about managing money from their parents.

Stacey Black, BECU financial educator.
Stacey Black, BECU financial educator.

Finding appropriate moments to talk with your children about money will benefit them for years to come. “Teaching financial health to students before they start their adult lives helps teens develop awareness and make more educated saving and spending decisions,” says Stacey Black, a financial educator at BECU.

After all, the financial health of the average American could use some help. According to a 2016 survey by Federal Reserve Board, nearly half of Americans said they could not come up with $400 to cover an emergency expense without borrowing or selling something. Black explains that it’s never too early to learn how to manage money responsibly. “We believe that people exposed to basic budgeting and financial education, especially at a younger age, will be more likely to develop better savings habits and be more prepared to handle financial challenges,” she says.

When it comes to having the money talk with your teen, BECU suggests focusing on four different areas of money management: spend, save, borrow and plan.

Spend

When teens think about money, they’re probably thinking first about how many different ways they can spend it, so this makes a good entryway to a bigger conversation. To help your teen manage their cash flow, and build savings for the future, Black recommends that you ask them to list the items they spent their money on in the last week and compare it to the total amount they earned through allowance and/or jobs. You can use this as an opportunity to offer up your own financial experience as well, sharing the last big purchase you made. How you were able to pay for it? How long did you consider buying it? Did you shop around beforehand, apply for a loan or save up?

Try to encourage your teen to give themselves 24 hours to decide whether the item they want to buy is something they want or something they need. “If it’s a ‘want,’ encourage them to put the item on hold. Then explain how if they look at their budget and decide they can afford it, it’ll always be there the next day. This gives them more time to think and could help eliminate any potential buyer’s remorse,” says Black.

Save

Encourage your teens to start thinking about saving early. You can frame it as an essential way to deal with and plan for unexpected expenses, like if their car needs a repair or if they lose a job they had suddenly.  Black also recommends explaining how having sufficient savings means being able to take advantage of bigger financial opportunities in the future, like investing or paying for education.

Challenge your teen to think about the 10 percent rule: saving at least 10 percent of their paycheck or allowance, and even more when able. “You can help them set up automatic transfers to their savings account to help them stay on track. It’s most important to get into the habit of saving something,” says Black.

Borrow

Loans, debt and credit scores are probably pretty far from your teen’s mind, but you can introduce the concept of borrowing through the financial borrowing they are likely to face in the future: like student loans or opening their first credit card. Black suggests discussing how you built your own credit, like when you first applied for a credit card or loan and what lessons you learned along the way. You can also explain how credit scores are calculated and emphasize how important they can be, as they are often considered by potential lenders, insurance companies, landlords, and even future employers.

Help them learn to make on-time monthly payments with a monthly car payment or other loan, even if it’s just to you. When the time is right, you can encourage them to open their own credit card to begin building credit.

Plan

Perhaps the most important part of talking with your teen about money management is that they learn how to properly plan ahead for future financial decisions, both big and small. Help them plan for an independent and strong financial future by setting goals and preparing for upcoming expenses they may be facing: like college, moving out or getting insurance. Start the conversation by talking about your own budget and financial plan. Black recommends going through your monthly bills together and showing them how you pay them each month.

Black also suggests that teens start a spending journal or use a money management tool, like BECU’s Money Manager or other apps, so they can see where their money is going and figure out where stricter budgeting may be necessary. She says BECU has plenty of tools, resources and advice parents may need to help get their teens off on the right financial foot. Black says, “We want to make it easier for parents to help their teens get familiar with finances and jump into adulthood with a sense of financial independence.”

As a member-owned credit union, BECU is focused on helping increase the financial health of its members and communities through better rates, fewer fees, community partnerships and financial education.