My teenagers will soon be financially independent. Most likely, I won't have any influence over their purchasing decisions. I know they won't be calling me from college asking for advice about personal finance.
Spend less than you make
I told my son when he started his lawn mowing business at 13 to remember only one rule of personal finance. Always put aside at least 10 percent of all money you earn. I also had my children save 10 percent of any birthday gift they received over the years. To encourage charity, I told them some people take an additional 10 percent of their income and donate it to a worthy charity or to church as a tithe.
Automate your savings
Because people are human they often fall into the temptation of spending ever dime they make, it's best to automate savings. When my sons were old enough to open up their own checking and savings accounts, I showed them how they could have a certain amount of money automatically moved into savings each month. Once he had a job, my older teenager opened a Roth IRA account, automatically saving money each month.
Pay off credit card balance
Even though I'd love to live in a world with no credit cards, it's a reality of life. My sons want to have good credit scores so they can one day purchase homes and cars and low interest rates. It would be great if they could pay cash for a home one day, but more realistically it would be good if they could get a low interest rate. By paying off their credit card balances every month they prevent debt from sneaking up on them. I got into the habit of not only paying off my credit card balance at the end of the month, but using on-line banking to pay off my credit card purchases weekly and sometimes daily.
Act on historic trends
My sons don't remember when interest rates on mortgages reached 18 and 19 percent. I don't remember those days either, but I have heard that mortgage interest rates in the 1980s rarely ever dipped below 10 percent. I encourage my sons to pay attention to the fact that mortgage interest rates are at historic lows. I also taught them about the bear and bull markets. When it comes to investing in the stock market, I encourage them to dollar cost average into ETFs (exchange traded funds) so that they don't have to worry about a company going bankrupt. They can research stocks and ETFs and check out the charts on Yahoo Finance to identify historic trends that show whether a stock or fund is undervalued or "on sale."
Although a college education is important, knowing how to stay out of debt and build wealth for the future isn't a required course. When it comes to my teens and money, I tell them being responsible with money is a prerequisite to adulthood.
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