By Katie Smith

My daughter has a birthday coming up and the dollar bills are flowing in from her aunts, uncles, grandparents. As soon as she grazes over the birthday card, she stuffs the money into her wallet and asks if she can go shopping every hour on the hour.

I realize it's hard to be a 14-year-old girl who loves clothes, shoes and fancy things for her bedroom. I was her–some days, I still am her–when the excitement of getting something new takes over the rational side of my brain that tells me to put down the supple handbag and walk away slowly. Pretty things sing to my soul. There is nothing like wearing a fresh T-shirt or new pair of jeans.

With the pressures of school, sports, friends and wearing and doing the right things, being a teenager is hard enough these days. Even without parents preaching to them about the importance of being financially responsible.

I know when my parents would talk to me about such things it didn't sink it at all. I didn't even really want to educate myself on how to save money. Words like "interest,” "saving" and being financially "secure" went way over my head.

However, things like new gold bangles, perfume that smelled like baby powder or a new cassette tape got through to me–that was a language I could understand. Now that I have three teens myself, I recognize it's part of my job to teach them financial responsibility and I'd like to do it in a way that will resonate.

I know they probably aren't going to save every penny, but instilling good habits in them now, even if they aren't interested, will help support better decision-making later in life when the reality of being a young adult sets in. Here’s advice from two financial experts on how to approach the issue with your teens:

Family Circle talked with financial expert Janet Alvarez, Wise Bread. Alvarez is a mother herself and understands the importance of teaching our kids about managing their finances, before they leave the nest and your constant guidance.

  • Show them how to budget: There are a million different ways to budget, and whatever works for you may not work for your child. But encourage them to develop a system to track and categorize spending and then compare those expenses to their income.
  • Teach them the pros and cons of credit cards: You can help your kid apply for a card, but it should come with a series of warnings. Young people must know that credit card balances should be paid off in full each month whenever possible. Show your child that credit card interest rates can be exorbitant and that high balances can lead to a debt spiral from which they might never escape.
  • Outline the pain of debt: Take time to explain the basics of borrowing so they understand how expenses can continue to increase if debt is not paid off. Show them calculations with interest rates for credit cards, auto loans, student loans, personal loans and mortgages. Give them an understanding of debt-to-income ratios and what that means in the context of their financial well-being.
  • Share Your Money Backgrounds: Just as you and your partner should know about each other's health, family, romantic, and work backgrounds, it's important that you share financial backgrounds with each other. This starts with the obvious, such as outstanding debts and current assets.
  • Set Financial Ground Rules: Financial ground rules allow you to both feel comfortable within the framework of your finances. You might also set rules on spending thresholds over which you have to discuss issues before spending the money, or how you might use joint accounts.

Brian Ford, SunTrust’s Financial and Well-Being expert also adds some great tips that will get your teens thinking right now about why it's important to save, think ahead and plan for the future:

  • Teach them how to save: Your teen might have an opportunity to make a little money. This income might stem from a part-time job or from a weekly allowance for household chores. Unfortunately, your teenager is also at an age where peer pressure and advertising might persuade him to buy things without thinking through the purchases. As tempting as spending is, this is a good time to teach the value of saving. Talk to your kids about paying themselves first by putting part of their earnings into a savings account.
     
  • Needing, Wanting and Wishing: Help your child to learn the difference between needing, wanting and wishing. She may need a jacket, but wants an expensive one. Added to that, she could plan to go to Europe with friends next summer. Explain that sometimes certain things have to be postponed in order to achieve savings. Assisting your child in creating a budget around her goals might help further distinguish between what she wants and what she needs.
     
  • Growing Means Making Mistakes: Your teen is going to doubt your best advice and make a mistake. They may buy clothes and subsequently have no money left to go to the movies. This is not a bad lesson for them to learn. In fact, it might just help your kids learn that discipline with money can bring punishments as well as rewards. Next time, they might be more conscious of what they want and budget accordingly. It's hard to resist something you want-- especially if you are a teenager without a mortgage and an attitude about living in the now. But incorporating these tips to educate our children, and plant seeds about having a healthy attitude about money now will hopefully give us a huge return in our investment-- so will resisting those shoes I really want but don't need.
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