For many teens, it’s been a summer full of fun, socializing and spending. But back-to-school means back-to-business. With inflation, student-loan forgiveness and other economic topics dominating the news, parents might be wondering about the importance of raising money-smart kids.
In most schools, real-world finance courses are rarely part of the curriculum. Given this, it’s not surprising that teens only scored an average of 64% on the National Financial Literacy Test, which measures participants’ ability to earn, save and grow their money. Despite this alarming information, experts say there are ways parents can help their kids become great with money.
Money Talks
Teaching your kids to be money savvy starts with conversation.
“Talk with your teens about how to save, spend and even invest their money, whether earned from a summer job, babysitting or household chores,” Jennifer Seitz, a certified financial education instructor and director of education at Greenlight, a kids’ banking app, said. “Money earned may feel like a bonus for teens, but that doesn’t mean they should spend it right away without a plan. Even if spending is their primary motivation to earn, talk to your teens about budgeting, setting savings goals and investing. Saving is all about spending in the future.”
Seitz also recommends using the news as an opportunity to talk with teenagers about economics. Many kids are just learning what terms like “inflation” or “bear market” mean. Talk with them about the news headlines and explain what’s happening in the economy.
A great topic to start with is inflation.
“Does your teen know how the average cost of items has increased year over year? From May 2021 to May 2022, that number increased 8.6%,” Seitz said. “In June, the stock market officially turned to a bear market — but what does this mean?
For anyone who might not know, a bear market is a period of price declines and low investor confidence. It’s commonly described as a fall of 20% or more from recent market highs on major indexes, such as the S&P 500 Index or Dow Jones Industrial Average.
Roy Paul, executive director of Cents Ability, Inc., a nonprofit dedicated to teaching kids financial literacy, shared tips on Facebook that both families and teens can use while navigating through inflation. These include:
- Save 20% of your monthly income for rainy days
- Make a list before you to to the grocery store
- Don’t be afraid to try the store-brand items
When back-to-school shopping, talk with your teen about the difference between wants and needs and how to make smart spending choices. This is a great way to help raise a money-smart kid. Both wants and needs have a place in a budget, but the key is in the balance, Seitz said.
“It’s easy to get caught up with excitement when shopping for the new school year — or a new dorm for teens headed to college,” Seitz said. “Still, it’s important not to let emotions lead to purchase decisions that are outside the budget.”
For example, maybe a certain backpack is really important to your teen. This is fine as long as your child understands the opportunity cost or what they are giving up.
“It’s also a great time to look for a sale in-store or online. Comparison shopping should be part of every back-to-school plan,” Seitz said.
More Tips for Raising Money-Smart Kids
Seitz shared some additional tips to help ensure financial savings for families during challenging economic times. These are tips families can use to save money while teaching kids valuable economic lessons.
Take advantage of rewards and cash back. Gas and grocery prices are through the roof these days. Consider grocery shopping where you can earn fuel rewards to pay less at the pump with every dollar spent. If grocery costs are up, so are gas savings. Credit card rewards are another way to help offset inflation, when the balance is paid in full each month. Just ake sure you understand your reward program to maximize the benefit — and cash in for the most value.
Extend the life of purchases. For example, save on gas by doing multiple errands at once. Set up carpools for kids’ practices or walk to school. When it comes to shopping, start eliminating waste to make sure you and your family are only buying and preparing what you will use. This is a great lesson to share with your kids, whose eyes can be bigger than their stomachs at times. Make your money — and your purchases — last.
Invest for the future. Always stay diversified, no matter the market conditions. Maintaining a well-diversified portfolio can help keep your investments stable. Look long term — decades, not days — when investing. Historically, bear markets are much shorter on average than bull markets, and markets have gone up over time.
Staten Island Parent can help you save money, too. Check out our guide to restaurants where kids eat free, and our calendar that lists many free activities families can enjoy throughout Staten Island.
Wanna read more stuff like this? Get our newsletters packed with ideas, events, and information for parents in Staten Island.
