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Michael Yardney
By Michael Yardney
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How to help your teens become money smart

You may think that being good with money is something that you’re born with.

Like being good at English or sports, perhaps you see it as a skill that some people just happen to have.

I think this is a dangerous assumption, but, unfortunately, it’s one that many parents make about their kids.

They categorize their strengths and often explain away bad money habits as “maths not being their strong suit” or something they “just can’t do very well”.

Multicultural Group Of High School Teenage Student

But kids are a blank canvas

They’re as good with money as we enable them to be.

It’s up to us to teach our kids HOW to be good with money.

Although they’re never really too young to be educated about finances, the teenage years are crucial ones.

This is the time when many kids take on a degree of financial independence.

They get their first jobs, start saving for a few luxury items, and start planning the purchase of their first car.

Here are some of the key lessons we need to be teaching them in their teens.

Understand the importance of working part-time

When your kids are younger, their finances are controlled by you, the parent, and that is fair enough.

This is how it should be when they’re little.

But you can still instil a sense of responsibility in them by giving them pocket money only after they have completed a few household chores.

When they reach their teenage years, encourage them to get a part-time job, so they learn the importance of earning their financial freedom.

Teens should learn that there is a direct correlation between money and work outside of the home.

There’s no such thing as a free ride

This brings me to the concept of no such thing as a free ride.

Teenagers are expert manipulators when they want to be, and sometimes parents give in too easily to their needs and wants.

But this is precisely the time when you should be holding firm.

Don’t spoil them.

If they don’t have the money to buy something, make them work for it or push them towards a part-time job.

Giving them money without any effort on their part sets them up for failure in life.

They will become lazy and entitled, and employers won’t want a bar of them.

As a parent, it’s your job to stop this from happening.

Don’t buy that new laptop, car, or aeroplane ticket for them.

That truly is giving them a free ride.

Once they start earning money, charge them, board.

It doesn’t have to be much, but it gets them into the important habit of setting aside money each week for their future mortgage.

Save Money

Delayed Gratification

Even when we work hard, we sometimes don’t get our rewards as soon as we would like.

Often we have to work even harder or wait even longer to be able to afford the things we want.

Teach your teen about the concept of delayed gratification.

Perhaps they’re hoping to buy a car?

Teach them how to set aside money each week towards the car and how to stick to the budget needed to raise that money.

The sense of accomplishment they’ll have after they’ve saved on their own will be a huge confidence boost.

Resist the urge to chip in for them so they can get their hands on the item sooner.

Credit is not the answer

We live in a society that’s very relaxed when it comes to credit.

Most of us have a credit card, don't we?

Teenagers need to learn that credit card debt is bad debt.

Teach your teens the difference between good debt and bad debt

An example of good debt is an appreciating asset, like property, a bad debt is one that is not paid off straight away (the credit card) and accumulates interest at an eye-watering rate.

Teach your teen about the importance of paying off a credit card each month, and highlight to them how much unnecessary interest they will pay if they don’t.

The latest credit card statistics in Australia at a glance

  • Total credit card debt in Australia: $41.09 billion
  • Total number of credit card accounts: 13.52 million
  • Average balance per credit card account: $3,039
  • Average monthly credit card repayment: $2,589
  • Average credit card balance being charged interest: $1,376
  • Average value of a credit card transaction: $114
  • Average number of monthly credit card transactions per account: 22.9
  • Average credit card interest rate on outstanding balances: 18.23%
  • Average annual credit card fee: $135

Credit Card Debt

There are consequences of being irresponsible

Despite your best efforts, your teen may choose to ignore your advice and get into hot water.

The best thing to do in this situation is to help them come up with a solution or a payment plan.

It’s important that you don’t become the solution.

They need to realise that if they are irresponsible with their money, that there will be consequences.

They may need to work extra hard to pay back a debt or go without a purchase for longer.

These tips may seem tough, but if you stick to them you will be launching a well-adjusted teen into the world. They’ll be self-responsible and prepared to work hard.

They’ll also be less likely to join the hordes of young Australians with thousands of dollars on their credit cards, and no hope of entering the property market.

Michael Yardney
About Michael Yardney Michael is the founder of Metropole Property Strategists who help their clients grow, protect and pass on their wealth through independent, unbiased property advice and advocacy. He's once again been voted Australia's leading property investment adviser and one of Australia's 50 most influential Thought Leaders. His opinions are regularly featured in the media.
2 comments

Great points, how and when do you recommend they get started in the property market? My 14 year old boy works in the weekends and school holidays and has saved up $3000 in the last year. He buys shares for now. Should I help him buy his first apart ...Read full version

1 reply

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