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5 Ways to Prepare Teens for Financial Independence

by | May 2, 2019

While there’s no doubt that helping our children is a core value, we help them the most by demystifying what it means to be financially independent. 

A friend of mine received a Mother’s Day card from her oldest daughter a few years ago. On the outside was the normal “Happy Mother’s Day, Mom,” but the interior punchline was precious …”The first 40 years are the hardest!” She and I got a good laugh out of that. Even if you employ the 1830 rule, it seems parenthood doesn’t stop when your children leave home; if anything it’s just getting started!

It’s clear that children want to be independent but still need support. A recent article from the website Next Avenue, How young adults feel about financial independence from their parents, provides an interesting perspective about the financial support that young adults believe they need and what parents are providing. Ultimately both sides feel conflicted about what is expected and what is appropriate.

The extent to which parents decide to help their adult children financially of course depends on a wide array of factors. What’s alarming from a future success point of view, however, is that whether the money comes from Mom and Dad or elsewhere, many teens have no idea how to handle money in their lives.

Financial Knowledge Among Teens is Lacking

I’ve spent considerable time at high schools in the last few years between mentorship programs and Raising Families’ courses geared for teens. Here’s what I’ve observed about teens and their financial knowledge: 

Things most teens know about money:

  • They need money to live
  • Money comes from parents or a minimum wage job
  • Cost of their cell phone (maybe)

Things most teens DO NOT know about money
(but need to):

  • The real cost of food and clothing
  • The cost of a home or apartment
  • How to calculate interest on a loan
  • The true cost of a car (purchase price PLUS insurance, registration, maintenance, gas, etc.)
  • How to translate hourly wage into an annual income

Despite their lack of technical knowledge, whenever our classroom discussion turned to the topic of finance, the students always perked up and became visibly engaged. Why? They wanted to be out on their own after high school (i.e., financially independent). They simply didn’t know how.

At first when I asked about what they expected for themselves after high school, many answered with things like sports cars and large houses in major cities. Over time, as the realities of taxes, down payments, and maintenance costs were revealed, their expectations became far more realistic, at least for their immediate futures. At that point we could have meaningful discussions about what they needed to do to find work and save and prepare for the time in their lives when they might be able to purchase all that they dreamed for themselves at the beginning of the conversation. 

You can have this same type of conversation with your teen to help them set realistic goals for themselves.

5 Important Topics to Discuss

Discuss these five topics to give your teen a huge head start on their financial literacy and the actions they can take to be financially successful

01 – Basic Financial Concepts

  • There are about 2000 hours in a work year. Show them how to calculate an annual income from an hourly rate. Divide by 12 to compute monthly income.
  • Share with them what it costs to live each month (rent, utilities, food, clothing, medical, transportation, auto insurance, vacations, entertainment). Include a discussion about the impact of payroll taxes (US, state, Social Security, Medicare). Add it all up and then have them compare that to what it takes to earn each month to live on their own.

02 – Budgets

  • If you buy them new clothes for school each year, give them a budget and talk about how you arrived at that budget and set expectations about how the money would be spent.
  • Make a weekly menu with your teen. Discuss the cost of that menu. Set a budget and take them grocery shopping with you. Discuss the choices you make at the grocery store.

03 – Living Expenses – Mortgages and Rents

  • Share with them your experience moving out of your parent’s home. 
  • What didn’t you know? What did it cost? How did you pay for it?
  • What do you have to do to rent an apartment today? What are the upfront costs?    

04 – The Cost of Education and Their Plan after High School

  • Find someone who works in their field of interest and have them spend time with that person.
  • Talk about whether or not college is right for them at this time.

05 – Alternatives to Spending

  • Help them understand what you can do with money beside spending it, to include saving, investing, or donating to charity.
  • Consider helping them find an online financial planning course for young adults.

It’s up to us as parents to get our children ready for financial success. At Raising Families, “success” means independence, not exuberant wealth. Help your teen understand the basics of personal finances as early as possible. Armed with that knowledge they have a secure and stable foundation to reach for the stars, with or without a little extra financial padding from you. 


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Rick Stephens

Rick Stephens is a co-founder of Raising Families. With 33 years of experience as a top-level executive at The Boeing Company and having raised four children of his own, he is able to support parents and grandparents by incorporating his knowledge of business, leadership, and complex systems into the family setting. In his “free time” Rick enjoys road biking, scuba diving, visiting his grandkids, and generally trying to figure out which time zone he’s in this week. Read full bio >>