Ask the Readers: How to Talk About Money with Teenagers?
Published on - April 23rd, 2010 (by J.D. Roth) Most readers here at Get Rich Slowly have their own tale of a financial turnaround. Many of us were just plain dumb with money when we were younger, and it took us years (or decades!) to realize the error of our ways. But what if somebody had cared enough to intervene before we got into serious trouble?
Corinne wrote yesterday looking for help. She’d like to help steer her younger sister in the right direction before she has financial trouble. But how should she do it? What’s the best way to reach a teenager who doesn’t even know they’re financially irresponsible? Here’s Corinne’s question:
I come from a wonderful family, with parents who are great in many ways, but are also just terrible with money. Fortunately, I’ve managed to avoid following in my parents’ footsteps — I’m 25, with a well-paying job, and have started really organizing my finances well and planning for my future.
My younger sister, however, may not be so lucky. She’s 18, about to start college, and just couldn’t care less about being smart with money. I want to guide her and inspire her to learn about personal finance sooner rather than later because I wish someone had done that for me. Do you know of any personal finance books that would appeal to a teenager? Any thoughts on how to frame my advice so that it’s well-received?
This is a great question, especially for this time of year. And while I’d love to be able to say, “Go buy Your Money: The Missing Manual — that’s the best choice!”, I don’t actually think my book is good for a kid out of high school. (My book is good for folks who are serious about their finances, who are motivated to succeed. It doesn’t sound like Corinne’s sister qualifies.)
So what books about money are good for teenagers and young adults? Here are a few top choices:
- I Will Teach You to Be Rich by Ramit Sethi. My friend Ramit set out to write a money book for young people, and he succeeded admirably. Even if I had no idea who he was, this would be the first book I’d recommend for most students. Two drawbacks to note: Not everyone likes his tone and style, and the book doesn’t really address the psychology of spending. (Here’s my review.)
- Debt is Slavery by Michael Mihalik. I raved about this book a few years ago. Of all the personal finance books I’ve read, I think this would have been most useful for me when I was in college. It’s not a comprehensive guide to IRAs and stocks and bonds; it’s a short treatise on how to take control of your financial life.
- The Money Book for the Young, Fabulous, and Broke by Suze Orman. This is a pretty comprehensive introduction to personal finance aimed specifically at young adults. There’s almost too much information.
- Reality Check: The Student’s Guide to the Real World by Grant Baldwin. I haven’t read this book; the publisher sent me a copy, and I’ve leafed through it. It gets great reviews at Amazon.
- Get a Financial Life: Personal Finance in Your Twenties and Thirties by Beth Kobliner. This book comes highly recommended, but I haven’t read it.
The second part of Corinne’s question is tricky. How can she give advice to her sister without angering her or making her turn away? I’ve found from my own experience (and from chatting with others) that it’s difficult to get somebody to heed your advice until they’re ready to hear it. They have to come to it on their own. In fact, it’s possible to alienate the person you’re trying to help if you come across as an evangelist. If you push personal-finance books on somebody, they may be offended.
Instead, I think it’s best to lead by example. If Corinne thinks her sister should change, she should subtly show her what smart personal finance looks like, and then contrast that with how her parents are doing. Or maybe Corinne could pick up a copy of I Will Teach You to Be Rich, read it, and then offer to pass it on when she’s finished.
Another smart technique is to think out loud in front of the person you’re trying to help. Say Corinne is buying a car, for example. Even though she may know perfectly well what she wants to do — buy a late-model used car with cash — she might approach her sister and say, “I’m not sure what to do.” If Corinne lays out her options and her thought process, asking her sister’s help, she might be able to help her sister see how she arrives at her eventual decision. (Please note that the car thing is hypothetical; it could be any other sort of financial dilemma.)
The key in these situations is finesse. You want to get your message across, but you want to do it from a position of equality, not superiority. And, if possible, you want to do this so that the other person “owns” the action. That’s how I’d approach it, anyhow.
Have you faced this situation in the past? How did you handle it? How do you think you’d handle it today? How would you try to talk about money with a teenager? What books would you recommend? How would you get them to even care?
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To say that some people don’t like Ramit’s tone or style is an understatement. He comes off flat rude and condescending sometimes and mean at others. His advice is valuable, and it’s unfortunate that a lot of people who may need it will never get past his tone. I can’t see a teenager who knows nothing about money management taking his lessons very well.
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I agree that at this late stage the best advice is being a role model. It is way better to catch them when they are younger. However, if she asks, go for it.
I like Motley Fool books for teens…
The Motley Fools Investment Guide for Teens; How to have more money than your parents ever dreamed of. This book is written for younger teens but explains basics in very clear english. It’s not just about investing but about choices in personal finance.
They also have one about college which I have just started reading and You Have More Than You Think You Have: The Foolish Guide to Personal Finance.
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A book may be a good gesture, but is not always appreciated (or even read).
Talking with your sister and sharing your experiences is much more personal and builds on your shared experiences. Also, talk about your parents… since you both have that in common. “What do you think mom and dad did well? What do you want to do differently than they did?” Since you have obviously thought about these questions, there should be opportunity for a good conversation.
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I’m surprised this post didn’t include blogs! A book might not be well received, but I think teenagers would respond well to blogs. I’d recommend GRS, but there are many blogs out there for younger people as well. You can always go the “I read an interesting post on such-and-such an issue, what do you think about it?” route.
Another way to go is financial make-over TV shows. I’m not sure what’s available in the States, but shows like “Maxed Out” or those shows were brides go hideously over budget for their weddings can help start conversations about money.
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Unasked for “advice” tends not to go down wonderfully with anyone, especially teenagers! However, I like the thinking-out-loud option. The other think to do is just talk to her. Find out what her goals in life are. Does she want to go to college? Get a car? Live in a place of her own? Then discuss how money can be used to fund these options, how said money can be obtained, and what the pros and cons of each option is.
The key thing here is to *discuss*, not dictate. Let her lead the conversation, and bring in your experiences (good and bad). It may also be worth splitting it over a period of time so that it doesn’t get too heavy. Maybe you could organise a girly afternoon for the two of you and work it into that?
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I just got out of my teenager phase only a few years ago. Thankfully, my financial situation is more like Connie’s.
The sad thing is: If the sister hasn’t been taught about financial responsibility while growing up, it will be harder to accept advice in her college years. This would be tough to do, but letting her learn from her own mistakes may be a good option here.
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I will agree with your recommendation for Ramit Sethi’s blog (not the book though – I don’t know too many teens who would be willing to read a personal finance book in their spare time).
And I also agree with SF_UK that the discussions have to be geared towards goals. I remember as a teen and even in undergrad, I was very focussed on the NOW and short-term goals. I seldom gave too much thought to long term stuff except in very general ways.
Getting a teen and young adult to think about concrete longer term goals will also make them aware of some of the financial groundwork that will need to be in place to make those goals happen.
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I agree with SF_UK.
Unsolicited advice doesn’t sit well with anyone – especially teenagers.
The best way to drill a lesson home is to let teenagers make their own mistakes; mistakes will happen no matter how much advice you provide.
Your job as an older sibling or a parent is just to be there for damage control.
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As a counselor I can tell you the best way to foster change in someone else is called “Motivational Interviewing.” DO NOT tell them why they’re wrong or what they should be doing. Instead, listen to their reasons (“I need a PS3 because…”) and totally acknowledge the positives of why they think that. (“It’s true, you do love video games, and I hear it’s a great system.”) and usually the person will then feel safe to comment negatively (“but then again I don’t have the cash for it, I’m not sure it’s smart”) and then you can subtly suggest. Say, “Well, you could always save up for it, that’s what I’d do, it will still be there,” and then expect them not to take your advice. It takes a long time to learn things and you have to let people make mistakes without judging them. All along, live your life as an example and she’ll probably get there.
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I love giving unsolicited advice, but unfortunately this post is dead on:
http://bly.com/blog/general/why-i-never-give-unsolicited-advice/
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If you’re thinking of giving your sister a gift as a high school graduation/congrats on starting college present, maybe you could include a personal finance book. If you have a good relationship with your sister, maybe you can make her up a care package (a gift certificate for a coffee place, so she can get late-night caffeine fixes while writing papers, a phone card to call home, some lavender hand cream to help de-stress, etc etc). You could even include a letter telling her you’re proud of her and hope she does well, and the reasons why you’re including each gift that you give her. This will let you bring up finance stuff without coming on too strong, and will still allow you to communicate the care you want to show your sister.
You say that you wish you had started learning about personal finance earlier… why? Did you make mistakes you wish you hadn’t? I find people are more likely to value what you have to say when you speak from a place of sharing your life experience, rather than ‘giving advice.’
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I totally agree with the blog post Four Pillars linked to!
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This might be more for parents, and more for background, but as a parent, I enjoy reading the Wall Street Journal “Yoder and Son” column every Sunday (http://online.wsj.com/search/aggregate.html?article-doc-type={Yoder+%26+Son}). In it, a father and one of his teenage sons talk about how they look at money. Two sons tend to rotate — one still in high school, and one in college. They seem to hit a lot of typical, albeit high-middle-class issues about who buys what, how to save, when to spend, etc. I most enjoy the conversations they have about money.
Is there any way you can show her what you do and how you do it, perhaps by asking for some advice or her input, as others have suggested? Maybe she’s good with clothes, so you can ask for help and go over your clothing budget and where that number comes from — you get the idea. Also, be willing to share some “I was so dumb!” stories — I think siblings like those, too.
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As a college freshman myself, I agree that most college students or teenagers in general don’t want to think about personal finance or any responsibility in general. I’d like to share how I got into personal finance as a teenager. The way I got into it is twofold:
First, I saw my brother and sister get themselves into a mess. They’d borrow in the hundreds of dollars from me when I had part time jobs to pay off a bill and would sometimes pay it back, other times not. I refused to do that to myself… i knew that since I had to be the rock for my older siblings, I felt a sense of responsibility to take care of my entire family, as best I could. And that meant not putting pressure on my parents to bail me out of my money issues by not having any issues.
The second way I started acting more responsibly was in part thanks to my parents. While they never truly taught me about personal finance specifically, they made me responsible for myself. When I wanted to get my license, I had to convince them why it was a good idea, find a way to pay for driver’s ed, for the test, for the license itself. Even when I got my license, I couldn’t drive much. I had to prove myself. I bought my first car from my sister, in cash. My parents were willing to pay insurance, and my dad did repairs himself, but did not pay for the car or the gas at all. They gave me a small gas allowance only my senior year of high school because I quit my job under their advice (I was stretching myself too thin) and I was driving myself to school (no buses to my house). My parents also refused to pay for anything that wasn’t necessary. New shirt I liked from the store? I had to buy it. New winter coat because my old one is too small/worn out? A necessity, and therefore they were willing to buy me a fairly inexpensive one. Even with college– while I was impossible for me to get private loans without a cosigner, the loans are my responsibility. My parents don’t contribute any large amount for my tuition.
All these factors pushed me to be independent. My advice is this: Find a way to (slowly) push your sister into having to take care of herself financially. And help her. But don’t do it for her. If she needs student loans, tell her to find some loans to apply for online, and then go through why each is a good or bad option. If she wants a credit card, make sure she has to demonstrate her knowledge of them before even considering it– quiz her if you must, on what will happen if she gets into debt, facts about the particular card she wants, etc. And have your parents help– if they just give her a card without making sure she understands them, there will be trouble. Also, I try to gently nudge my family into better habits: if I find a scary personal finance story, I email it to everyone to warn them. If I find good advice, I email that too. That way, you aren’t forcing it on them– you are simply saying, wow, I can’t believe x happened to this person! And you are opening up a conversation. Then you can demonstrate your knowledge of personal finance. Say things like, did you know…? Or, offer to help her set everything up for college. Go through and decide on which savings or checking account to open, and tell her– wow! this one charges $15 a month! think how much that is!
After you build up her confidence in you as someone able and willing to help her with her financial problems, without making it seem like you are trying to intervene, she will come to you herself. It takes time. But after a while, even the least expected people will be willing to listen and ask for your advice. Even my parents come to me sometimes (and I haven’t turned 19 yet).
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I think the thinking outloud/asking for help approach probably has the best chance of success, but then again it doesn’t sound like the sister is really interested in money at all.
I’d maybe consider asking her for advice on things that she’s good at, and then taking her advice. Then later if she has problems, she may feel comfortable turning to you for advice in return. Asked-for advice is slightly more likely to be acted on.
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Truthfully, there’s really no way to make someone aware about finances unless they wish to become aware. It’s almost like there are two perspectives about money, with GRS readers obviously being on the other side. Corinne’s sister will have to make that step into the other side, and only then will she be apt to listening to Corinne’s advice.
I have experienced this first hand, trying to help my girlfriend become aware in finances. However, her and her mother firmly believe that my girlfriend’s circumstances are different than everyone else, and mine especially. Basically, they think I’m financially fit because I make more money than them. But in retrospect, I have accomplished many things with my salary, which most regular* people couldn’t fathom doing with the same salary.
I tried to let her know that it’s all about being a good steward with the money that comes into your life now. If you can’t manage that well, why would God trust you with more? And although I like to refer to the spiritual context of that line, it can very easily be applied logically also.. Basically though, Corinne’s sister needs to be humbled in the world of finances so she can realize she needs the advice.
*I want to emphasize that when I say regular people, I am referring to people outside of financial awareness. GRS readers aren’t the norm
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This is a tough question – I think everyone understands the difficulty – it is a lot more about capturing the sister’s heart than about capturing her mind. I like the idea of addressing her as an equal,specifically
1) ASK her – What’s your fantasy from a financial standpoint? Do you want to be a millionaire? Do you want to develop passive income? and ask – HOW will you do that? What’s the first step you’ll take? What’s the next? How will you get to your end point? What are the potential obstacles that might come up? Assuming they can have an engaged conversation about the sister’s own future, Corinne can share her own experiences with each stage and issue.
Another idea – have fun with it. Check out some financial calculators together and play with them, do the math. See how the numbers and outcomes change with each change in variable, e.g., what would happen if there were no social security? What about if inflation was 6% vs. 3%? What if I only earn 4% return? etc. There are so many online resources, maybe playing with these tools will appeal more to a know-it-all teen.
Finally – I just adore the Dominguez/Robin book Your Money Or Your Life, especially the part that challenges the reader to calculate the REAL value of each hour of work – and then evaluate every expenditure against the amount of their LIFE they have to exchange to purchase it. It’s incredibly eye-opening.
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I’m in the same situation with my brother, I’m 25 and learned the hard way – now i’m paying off student loans and other small debts (my car’s been paid off for 2 years now, buying cash for the next, hopefully in 5+ years when mine dies).
My almost-20 year old brother reminds me of myself at his age, spending his money on material things and not saving at all. I did give him a finance book but he hasn’t read it, and since I live in a different state it’s hard to offer advice when he/I have questions. And I know I sure didn’t listen to anyone when I was his age. I might try that blog suggestion, thanks!
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As a parent I’ve found it’s best to sneak information about finances in regular conversation. For example, a payday loan office opened on the same block as their highschool, which gave us an opportunity to discuss interest rates. Or I might mention a horror story I read on a blog about credit card debt. We are pretty open about some of our financial decisions too.
Hopefully we have given them some good examples to follow. My teens are pretty frugal shoppers, especially when it is their own money they are spending! They research major purchases carefully.
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first, i love the idea of thinking out loud and getting her input so that you can then show her why paying cash for a used car is a better idea. secondly, as part of my job i go into local area high school and teach young adults about credit and how to use it responsibly. The response from the students and teachers alike has been overwhelming and it definitely seems like this is something schools should be doing more of to prepare kids for their financial futures.
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We get it, JD. You wrote a book. I’m sure it’s awesome, and I sincerely hope you sell lots of copies. But I’m sick of you plugging it. It’s making me like GRS less.
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I know as someone who is staring to work towards debt reduction and finanical freedom ( I am just a beginner and sharing my journey through my blog) I WISH someone talk to me and role modeled early on effective money management. But now that I see the light and want to share what I learn with others I do agree that people do not take unsolicited advice very well. Which is a shame because it could really help them.
My sister is the same way. So I try to talk to her about money. Falls on deaf ears. Never thought to get her a book but I personally love suzie orman and her books. I think I may look into that one.
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This situation with the sister rings so true for me also. My husband and I had been working on becoming debt-free with Dave Ramsey for the past 11 months and I really wanted to share with my two younger sisters (23 and 21) what I had learned and how they could achieve financial success, too. They both have been notoriously bad with money, the younger one has always been very vocal about it and my middle sister, not so much. But I knew they were living paycheck to paycheck and were in major credit card debt. I felt it was my personal responsibility being the oldest (at 24) to help them, as my parents (although they are good with their money) never shared anything with us financially as we were growing up.
They both knew of our goal, and when we reached it and we were calling into Dave’s radio show to do our DEBT-FREE scream, I emailed my entire family to let them know and to listen. Both of them did – and I know it was inspiring to other family members.
For Christmas, I bought them each a copy of ‘The Total Money Makeover’. The youngest one (who is always eager to please), read it and started to apply some of the concepts to her life and tried paying down her credit card. The other (who is my-way-or-the-highway), promptly put it on her bookshelf and went out and bought a new car with $450/mo in car payments.
You win some, you lose some, but at least I can sleep at night knowing I’ve tried. I’ll be here for them when they want to talk about it and I’ll continue to lead by example.
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I actually think that Suze Orman’s Young Broke and Fabulous is a terrible choice.
Apparently it was the go-to book of my generation (I didn’t get the memo) and now I have a ton of friends who are really regretting taking her advice to spend on that credit card early in their careers (especially during graduate school).
Going into low interest education debt for school is one thing. High interest credit card debt takes a lot longer to dig out of and traps you. She’s far too permissive about when to carry a balance.
In fact, it really gives exactly the opposite advice of Your Money or Your Life. Sure, consumption smoothing is the economically rational thing to do. But, from a behavioral standpoint, it is much better to pay your dues while you’re young so that you can enjoy an increasing quality of life as time goes on. A little sacrifice early on means a lot less sacrifice and a lot more freedom later. Financial independence in your 30s or 40s is actually possible, but not if you follow Suze’s advice (unless you really luck out with a start-up).
How about the David Bach book for women?
Oh, I second The Motley Fools Investment Guide for Teens. They are awesome and explain things very clearly.
p.s. I’ve spent a lifetime giving my little sister unsolicited advice. She’s used to it. And more often than not, she follows it when it is something she doesn’t know anything about. When DH’s little brother got his first job, we gave him advice on putting money away for retirement first and he took it. Little sibs sometimes do listen to their older siblings in a way they wouldn’t listen to their parents.
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Depending on the teenager, I think a short video would have more of an impact, or possible even a game. It would be nice if the video includes some pre-printed very simplified budget sheets too. And I mean really simplified!!!
I know when I read “Get a Financial Life: Personal Finance in Your Twenties and Thirties by Beth Kobliner”, I only read a small part of the subject that interested me. A teenager would even read less (depending once again on the teenager…).
I agree 100% that a person will only be financial advice when they are ready to hear it. But if they were taught the foundations in school, they’d be more open to it…
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I have heard Dave Ramsey mention this- it is what I would do- pick a book that you think would help her, then tell her you will pay her $100 to read it and give you a book report on it.
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I’ve seen one of the best things I’ve done with my teens is play podcasts out loud while they are lounging around the house. Clark Howard is a good one as they get a kick out of his sound affects announcing ripoffs and he talks about all issues including the dollar menu at restaurants that grabs their attention. Over the years they have come to know Dave Ramsey, Clark Howard and Bruce Williams just because its on instead of TV! Also nextdoor to their favorite video game store is a cash rip off place. We have lots of conversation about THOSE places when I take them to browse at their store!
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Expose your sister to the downsides of bad money management indirectly – maybe share stories of things that happened to people you know, or whatever, conversationally. This worked wonders for my little sister. She was a big spender when she was young, ripping through her allowance and borrowing money, etc. But later on she learned about other people’s mistakes and it changed her: a part time job in college working for a forensic economist gave her the opportunity to look at other people’s tax returns and hear about personal injury, wrongful death and fraud cases. She quickly realized that people get into debt through bad luck or bad decisions, and that it can quickly escalate into a horror story.
By her mid 20s she had goals (grad school, travel) and started to ask me and our parents questions…and she was able to make a decision to use short-term CDs to save intelligently for grad school, choose the best type of loan, and looks forward to the day when she has a good job (gotten thru the grad education.) She plans to quickly pay off her loan and eventually open a Roth IRA. Way to go little sis!
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I don’t think books are the best way to teach teenagers about money.
Instead I would suggest:
1. The parents to clean up their own act. As with alcohol, drugs, being on time, over eating, arguing/fighting with spouses etc… kids do what their parents *do*
2. A part time job. They control the money, being free to learn the lessons of managing the money well and being free to learn the lessons of not managing it well. Along the same lines one of those “deposit cash first” credit cards would be good for this. When the money runs out and stays run out, it will teach them plastic is “Real Money”.
3. A allowance with a fixed amount. Same rationale as #2.
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I was the “irresponsible” teenager and I hated the label. I knew my family thought I was a spendthrift and it hurt me to the point that when I did need help, I didn’t feel comfortable going to ask them, because I didn’t want to deal with their judgmental attitude.
What some people will see as bad financial sense, a teenager on the cusp of adulthood might see as differing priorities. I wasn’t spending my money on ridiculous things. I spent it on school, helping a friend with utilities, taking people out to lunch who couldn’t afford to otherwise. I lived my life like a non-profit, which I know was a bad idea, but once I needed help I didn’t know who had my best interests at heart, and who just wanted to say “I told you so.”
If someone had sat with me and asked me, “What are your priorities?” and after GENUINELY listening said, “Let’s see how we can stretch your money to fulfill all those.” I would’ve gladly sat down and learned more about how to improve my finances.
Sometimes when someone “couldn’t care less about being smart with money” it’s because they have other priorities and don’t see how finances would help.
Take your sister out someplace you can actually talk and enjoy each other’s company. Ask her what her real plans are with college; is there anything she’s thought about experimenting with as a career, has she thought about study abroad, and then listen. At the end of a mutual conversation say, you know that it can be difficult financially to accomplish all your goals in college and you want to support her as much as you can to achieve her goals, so if she wants any financial information, you have a couple books she can read, and you’d be happy to show her how you manage your finances. You want a happy, worry free life for her and you are excited for her future.
Then you have to wait for her to come to you. It’s the hardest part, but it will happen eventually. Hopefully if it happens “too late” you can still be calm, supportive, and non-judgemental. Because any time someone asks for help, it’s not too late. And remember, as a sister, you can show concern, you can guide, but you CANNOT parent. Regardless of their financial conduct, she already has those.
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@beforewisdom you wrote what I would recommend, except: handling money should NOT wait until a child is a teenager. Giving an allowance to a child will permit a child to learn about money when he or she can still fail without any major consequences.
It’s important to give some basic rules around the allowance. One way is to split the allowance three ways – savings, spending, and charity.
@TosaJen – I follow the WSJ and “Yoder and sons”. Very spirited discussions on teens spend their money.
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I love a lot of your ideas about how to approach this. I think the thinking-out-loud, what-do-you-think-about-this-financial-issue approach would work particularly well for my sister. She’s very independent-minded and likes to be treated as an adult.
I also particularly like Lisa’s idea of a college care package that includes a personal finance book, with an explanation of each item. I’m definitely going to do that for her.
Thanks everyone for sharing your ideas and experiences!
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Adding onto the ‘think out loud’ idea: DH has gotten further with his sister by telling her stupid things he’s done than telling her what should be done. He talks about how he wasn’t ready mentally to buy a house, or about how much money he spent on this or that and later regretted it. She is really resistant and that seems to be the only stuff she listens to. So much depends on the relationship. If little sis looks up to Corinne then she can just give advice. If little sis resents Corinne then she will get further with DH’s method.
Second, I would talk to the parents. Just because they don’t manage money well doesn’t have a bearing on how they will handle their daughter. Many parents, both good and bad with money, enable their kids to not learn from their money mistakes by bailing them out. If possible Corinne should talk to her parents now about likely mistakes her sister will make and how to approach it as a family. Part of the reason DH’s sister never learns or takes his advice is because it is far easier to go to their mom to pay the rent she can’t afford this month or whatever the current crisis is.
Most parents aren’t cool with leaving young adults out to dry, and that’s not what I’m saying, but there are ways of doing things to make it less comfortable. If she runs out of food money you could send cash, or you can buy a meal card to the cafeteria (if she’s in college). She can still eat, but the freedom is severely restricted. Or send a grocery card. It might just buy TV dinners, but once again it will cramp her style while still making sure she has enough to eat.
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Hands down – THE best finance book for anyone especially a teenager is The Richest Man in Babylon by George Clason.
http://www.amazon.com/Richest-Man-Babylon-George-Clason/dp/0451205367
It’s timeless…
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100% agree with 26/Tiffany. Buy her “I Will Teach You To Be Rich” and offer her $100 if she reads it and can carry on a conversation about it (or write a report on it).
If she doesn’t read the book for $100, you’re not going to be able to do much to help her. She doesn’t value money yet. Life is going to have to teach her some lessons before you can help.
If she does read the book, then not only does she understand the value of easy money (yay!), she has just been given the knowledge to help her get more easy money.
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fwiw, I thought “Debt is Slavery” was great and wish I had read it 30 years ago.
Disagree with those who advocate a completely hands-off, “damage control” approach. Personal finance involves skills that are learned, not inherent: these skills don’t magically blossom after a financial misstep. If they did, would we see people making the same mistakes over and over again?
Believe it or not, most people really don’t learn by making mistakes. They learn by having their mistakes corrected by someone who cares.
Looks like Corinne is already on board with the “talk and listen and be a good example” advice. Good luck! Being a good example is hard work!
@Karen #21, buzz off. It’s J.D.’s blog and he is completely entitled to use it to promote his book. EVERY for-profit blog promotes the writer’s product or service.
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I chime with the “true horrible stories of people you know” approach. I would also focus on 1-2 of the most risky problems for her age, like using credit cards without paying them off each month.
Maybe start with a “you may already know this but I really wish I had known it at your age…” intro, and emphasize that good behavior allows for more independence (whereas loads of debt = slavery).
If a total failure, you can then tell her true horrible stories of herself and see if it soaks in…
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You could use money as a carrot–Say that you’ll give them $100 but they have to match it and keep it in a savings account until they … (some goal) finish high school, finish the year whatever, or save towards a vacation in NYC or something. Tell them if they can do the match you’ll contribute again.
Because my biggest issue as a teen re saving money—I didn’t have any so it didn’t make any sense to save–so why not spend it instead? Perhaps if you give them concrete a reason to save and help them to do it, they will get the reward and start to realize the power of saving.
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The Richest Man in Babylon…just do it!
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Take her out to dinner, describe compound interest and compound debt, show her her potential in both situations with concrete examples (excel printouts would help).
Offer to go with her to set up a Roth IRA and direct deposit (if she will have income this year)
Books will not work until she is bought in.
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I mentioned Roth IRA’s to my 19 year old sister who’s getting her first internship this summer. I also got her a copy of David Bach’s Automatic Millionaire since it’s one of the few financial books I actually enjoyed. She said thanks and wrote me an email a few weeks later asking questions, so yay!
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My brother is 20 and is going through this “into the wild” phase (no work, no posessions,no ties to anything). He’s got nearly 2000 dollars in debt, doesn’t have a job, and has not made a payment in 2 years, the creditors call him everyday. He insists that theyl “forget” about him. I’m 22 and its hard to see him go down the same road I went down and had to bust ass to get out of. He just doesn’t care about money or anything, he doesn’t even have a phone. I don’t know how to help him. He’s very stubborn. Oh well I guess he’ll grow up eventually.
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Have a conversation about compound interest.
The way I got my teenaged daughter (18) to start caring is we sat down with an online RRSP calculator and plugged in some numbers. She estimated that this year she could save enough to put $800 in long term, retirement savings. She realized that if she never contributed another dime in her life that the original $800 would turn into $29,000 by the time she was 65. I could SEE the lightbulb go on over her head! She has been a savings machine ever since and has saved over $2000 in 5 months in long and short term savings from her part-time job. We have also had the same “compound interest” conversation regarding credit and carrying debt.
I’m hoping these little lessons turn into a lifetime of responsible money management for her. Especially because she still has a teenagers mind when it comes to life expectations and sometimes gets carried away dreaming about what her future career earnings will buy her. She figures that once she has her career established in four or five years, she’ll be wearing Louis Vuitton and Chanel everyday. Keep dreaming, Sweetie!
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Good question, I have a little sister that I’ve been thinking about talking to about personal finance. I tend to come off as lecturing though when we have these conversations, so this post is very relevant to me. Thanks for the ideas.
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I have found that pointing out previous examples of the teens behaviour goes a long way. You might browse the items the teen has previously purchased and discuss how she feels about them now, and if she had the opportunity to do it over would she still have spent the money. This makes them reflect on thier own decisions. They assign thier own value to the recent purchase. It’s like buying fireworks for the 4th of july… Yeah they were fun but what could I have bought that I would have enjoyed and still had something to show for it other than the warm fuzzy feeling of watching something explode.
Opportunity Cost
This is a fantastic way to get a teenager to understand purchase choices. If you only have X amount of dollars, what are you going to spend it on, and how does it affect all of the other areas your life, and what are you giving up by purchasing this particular item.
This obviously doesn’t work if they know that someone is going to be there 2 weeks later to buy the 2nd, or 3rd choice item they wanted.
Sitting down and going through a budget with what they earn/make. Go through the fun items first and see how much is left, if anything for the real needs such as rent or food.
The majority of us failed at times while we were young… I can remember spending way too much at bars or on video games or buying weed.
Useless items that are emotionally fun but not worth the financial cost when you look back. Sorta like buying a sports car(made that mistake when I was old) we all relapse.
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Procrastamom @ 42 — that was a great idea! I like how you engaged your daughter in that creative way. DO encourage her to work hard hard for things she wants (especually since you are already driving the importance of avoiding debt and savings to her now). You never know — she could do very well her first couple of years out of school and buy all of those Louis Vuitton and Chanel items she desires! People told me to keep dreaming. I dreamed all the way to six figures @ 24 years old (in a very cheap cost of living state). Keep dreaming girl!!!!!!
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When I graduated from college and moved out on my own, my older brother helped me make a budget. I would suggest Corrine ask her sister if she has thought about making a budget and offer to help. It can be difficult to make a budget if you’ve never lived on your own before and have no idea what to expect to spend on things like utilities and groceries.
My little sister is graduating from college next month, and I’ve been thinking about buying her a personal finance book. The problem with many of the books directed towards young adults is that the titles seem condescending. I think it might offend her if I give her a book titled, “Reality Check.”
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I think I would invite her to dinner to congratulate a change in life phase – sort of like a rite of passage. And during the outing, mention that when you were making that transition, you did some really dumb things and hope that she can avoid them: using credit cards, buying too many clothes, depending on mom & dad, etc. You can stretch it to make a point!
I would also share some of the horror stories of college students comitting suicide because they got over their heads with credit card debt. Stress that nothing is so bad, and even if she makes mistakes that you are there for her. And even better if you can help her before the mistakes.
Just a sisters date, talking about what it’s like to grow up.
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Surprised that I haven’t seen this yet, but when I was a teenager, I read “Learn to Earn” by Peter Lynch and John Rothchild. I thought it was a great book (so much so that I started investing in stocks when I was 15). So that’s definitely a good choice, IMHO.
I’d also like to second 26/Tiffany’s suggestion of the pay-for-a-book-report. This technique was actually used on me (quite successfully, I might add). Although for me, it was introduced by a friend’s wealthy dad… he said: Read “Richest Man in Babylon” (which has been suggested also, and is a GREAT suggestion!) and “The Millionaire Next Store” (which hasn’t been mentioned, but it still a great book) and in return, I was offered $1000… which I immediately put towards my college tuition.
Mind you, I’m sure $100 would be a great “carrot” to dangle in order to get her to read it. It’s money well spent.
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When I was in college, my father would drive the 4-hour round trip to pick me up from school and take me home for holidays (well until he started putting me on Amtrak…). During this time we had two hours together in the car and he would just talk about things – usually money. He would basically tell me stories about why he did the things he did. How he bought a house, how he decides when and to whom to donate money, what percentage of his salary he puts into savings and how and why it has changed over the years. I don’t remember ever having anything to contribute to these conversations but I certainly remember them now that I’ve bought a house, donate to charity, and save a portion of my paychecks!
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