As someone who grew up learning personal finance through experience, it often feels hypocritical to teach money management for teens. (I am so thankful that when I submitted my life to Jesus I was forgiven of my materialism.)
But if I skip these conversations, I am leaving my teens to figure out money management on their own… from the school of hard knocks… like I did. I want them to understand how God wants them to manage their money.
Helping my children make wise financial decisions by equipping them with personal finance skills is responsible and compassionate.
Maintaining open lines of communication about money matters can be challenging, but it’s so important.
Why Teaching Christian Teens Money Management Matters
Talking to our teens about money management helps them become financially literate adults who understand what the Bible has to say about their finances.
Just as we teach our children about hygiene and a healthy diet, they need to understand the basics of budgeting, saving, investing, tithing, and avoiding debt.
These conversations do take a level of trust in order to work.
How do you get to that trust level? Loads of prayer and open communication. When teens feel comfortable talking to us about money (or anything,) they’re more likely to come to us for guidance and support.
These conversations prepare our teens to make more financial decisions on their own.
By talking to them about money now, we’re helping them prepare for financial independence.
How can parents explain basic money management to teens?
Explaining money concepts like income, expenses, savings, thithing, and investments to your teenage children can be fun and simple.
In the simplest terms, here’s a way to break it down to they will understand:
Income
What it is: Income is the money you get. This could be from doing chores, having a part-time job, or receiving gifts for birthdays or holidays.
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How to explain: “Income is like the money you earn or receive. Imagine you did some yard work for the neighbor and they gave you $10. That $10 is your income.”
Tithing
What it is: Tithing is the practice of giving a portion of your income to your church. According to the Bible (Leviticus 27:30), this is one-tenth of your earnings, but the amount can vary depending on personal choice or religious guidelines.
How to explain: “Tithing is when you give the first 10% of your income to your church. If you earn $10 from doing chores and you give $1 to your church, that’s tithing. Everything we receive is from God so it’s a way for us to be obedient by giving part back to Him.”
Expenses
What it is: Expenses are the things you spend your money on. This includes buying snacks, clothes, games, or going out with friends.
How to explain: “Expenses are all the things you spend your money on. If you buy a movie ticket for $8, that $8 is an expense. It’s important to keep track of your expenses so you don’t run out of money too quickly.”
Savings
What it is: Savings is the money you keep and don’t spend right away. It’s like putting money aside for something special or for the future.
How to explain: “Savings is money you set aside to use later. If you want to buy a new bike that costs $100, and you save $10 each week, you’re putting money in your savings to reach your goal.”
Offering
What it is: Offering is a voluntary donation made to a church or a charity. Unlike tithing, which is typically te first 10% of your income, an offering can be any amount that you choose to donate beyond your tithe.
How to explain: “Offering is when you give some extra money to your church, on top of your regular tithing. If you’ve already given $1 from your $10 earnings as a tithe and decide to give another $0.50 because you want to give more, that extra $0.50 is your offering.”
Budgeting
What it is: Budgeting is a plan for how to spend your money. It helps you make sure you have enough money for the things you need and want, and it helps you avoid spending too much.
RELATED: Budgeting for Teens
How to explain: “Budgeting is like creating a plan for your money. Imagine you get $20 a week for allowance. If you want to buy snacks, save for a game, and still have some money for fun activities, you need to decide how much to spend on each thing. If you decide to spend $5 on snacks, save $10 for the game, and keep $5 for other fun stuff, you’re making a budget. This way, you won’t run out of money before you get your next allowance.”
Investments
What it is: Investments are a way to use your money to make more money. This could be putting money in a savings account that earns interest, buying stocks, or other ways to grow your money over time.
How to explain: “Investments are when you use your money to try to make more money. Think of it like planting a seed. If you plant a seed and take care of it, it grows into a tree with lots of fruit. Investments work the same way with money. For example, if you put your money in a savings account, the bank gives you a little extra money (interest) for keeping it there.”
By using everyday examples and simple explanations, you can help your teenage children understand these important financial concepts in a way that makes sense to them.
10 Tips for Keeping the Money Conversation Going
If you are giving your children an allowance or paying them for chores, you have a regular opportunity to talk about money management with your teens.
1. Create a Judgment-Free Zone: Make sure your teens feel safe discussing money matters with you. Avoid judgment or criticism, and listen without interrupting.
2. Be Approachable: Let your teens know that they can come to you with any questions or concerns about money. Keep the lines of communication open and be available to talk when they need you.
3. Use Everyday Opportunities: Money conversations don’t have to be formal sit-downs. Use everyday opportunities—like grocery shopping, paying bills, or planning a family vacation—to talk about money in a natural way.
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4. Share Your Own Experiences: Share your own experiences with money, both the successes and the mistakes. This shows your teens that you’re human too and helps them learn from your experiences.
5. Set Regular Check-Ins: Schedule regular check-ins to talk about money with your teens. This could be a weekly or monthly chat where you discuss their budget, savings goals, or any financial questions they have.
6. Be Transparent: Be open and transparent about your family’s financial situation. This helps your teens understand the value of money and the importance of budgeting and saving.
7. Teach by Example: Show your teens how you manage your own finances. Let them see you budgeting, saving, and making smart financial decisions.
8. Encourage Financial Responsibility: Give your teens opportunities to manage their own money using an allowance debit card like FamZoo. This hands-on experience teaches them valuable lessons about money management.
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9. Address Money Taboos: Break the taboo around talking about money. Encourage your teens to ask questions and discuss financial topics openly and honestly.
10. Be Patient: Talking about money can be uncomfortable for some teens, so be patient and understanding. Keep the conversation light and non-threatening, and give them time to open up at their own pace.
Teaching Teens the Dangers of Debt and the Importance of Credit Scores
There is a dark side to money management for teens, and we need to explain those dangers.
If you’re like me, you want your teens to grow up financially savvy, but explaining the ins and outs of debt and credit scores can feel daunting.
Don’t worry—I’ve got some tips to make these crucial topics easier to understand and more relatable for our teens.
The Dangers of Debt
Why It’s Important: Understanding the dangers of debt is key to helping our teens avoid financial pitfalls and stress in the future. Debt can quickly spiral out of control if not managed properly, leading to long-term financial problems.
How to Explain It:
- Keep It Simple: Start with the basics. Explain that debt is money borrowed that must be paid back, usually with interest. Use everyday examples, like borrowing money from a friend and having to repay more than what was borrowed.
- Use Real-Life Examples: Share stories about how debt has affected people you know or use relatable scenarios. For instance, talk about how using a credit card irresponsibly can lead to owing more than you can pay back, making it hard to buy things in the future.
- Explain Interest Rates: Teach your teen about interest rates and how they can make borrowing money expensive. Use simple math to show how a small amount of borrowed money can grow larger over time due to interest.
- Discuss Needs vs. Wants: Help your teen differentiate between essential purchases and things they can wait to buy. Explain that taking on debt for non-essential items can lead to financial stress.
Practical Tips:
- Create a Mock Budget: Work with your teen to create a budget that includes a scenario where they have debt. Show them how much of their money goes to paying off the debt and how it affects their ability to save or spend on other things.
- Role-Playing: Set up role-playing scenarios where your teen has to make decisions about borrowing money. Discuss the consequences of different choices.
The Importance of Credit Scores
Why It’s Important: A good credit score is crucial for securing loans, renting apartments, and even getting certain jobs. Teaching our teens about credit scores now can set them up for financial success in the future.
How to Explain It:
- What Is a Credit Score?: Explain that a credit score is a number that represents how trustworthy they are with borrowed money. It’s like a report card for how well they manage debt.
- Why It Matters: Discuss the impact of credit scores on their ability to get loans, rent apartments, and even the rates they’ll pay for insurance. A higher score means better opportunities and lower interest rates.
- How It’s Calculated: Break down the factors that affect credit scores, such as payment history, amounts owed, length of credit history, new credit, and types of credit used. Use simple language and examples to make it understandable.
- Building Good Credit: Emphasize the importance of paying bills on time, not borrowing more than they can afford to repay, and checking their credit reports regularly.
Practical Tips:
- Use a Secured Credit Card: If your teen is old enough, consider getting them a secured credit card with a low limit. Teach them to use it responsibly by making small purchases and paying off the balance each month.
- Monitor Credit Together: Show them how to check their credit reports for free. Discuss what to look for and how to spot any errors.
- Set Financial Goals: Help your teen set financial goals that include maintaining a good credit score. This could be as simple as keeping their credit utilization low or ensuring all bills are paid on time.
By maintaining open lines of communication about money matters with our teens, we are helping them build the knowledge and skills they need to succeed financially. It’s an ongoing process, but with patience, understanding, and a little bit of effort, we can empower our teens to make smart financial decisions now and in the future.
So, let’s keep the conversation going and continue to support our teens on their journey to financial literacy and independence. Together, we can help them build a strong foundation for a bright financial future!
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