4 money conversations you need to have with your teen

So, your child is no longer actually a child. In fact, they’ve reached their teenage years. You may think they need you less now than when they didn’t know how to read, but that’s not the case. Before, they needed you to help them stay alive and happy, now they need you to guide them into adulthood. And one of the most important aspects of adulthood is money and how to manage it.

It’s a tough subject to talk about if your teen isn’t particularly interested just yet, but there are conversations that need to happen now if you want your child to be moneywise in the future. If you’re finding it difficult to structure these conversations or know exactly what to talk about, here are the money conversations you need to have with your teen right now.

The importance of budgeting

At present, your teen probably doesn’t have to budget for anything. You feed them, you clothe them and you pay their school fees. The money they get from their part-time job or pocket money is spent on luxuries and having fun. But they need to know it’s not always going to be this way. In the future, they’ll have to cover all their own expenses and manage their money in a way that keeps them financially secure. The only way to do this, of course, is to budget. And the sooner they learn to budget, the better. You don’t want your twenty-something daughter or son calling you to ask for a loan… every single month.

But how do you talk to them about budgeting when they’re at that age when they think they know everything? Well, there’s an experiment you can do to teach them this important lesson. They likely won’t do very well at this exercise in the beginning, but at the end, you’ll be able to have a conversation about budgeting and they will listen.

So, what is this experiment? Make them cover their own expenses for a month – everything from their soccer club fees to their groceries. Work out how much money you spend on their expenses every month and then give them this amount all at once and tell them that you’ll be supplying nothing for them that month. And don’t be generous and add a little extra for luxuries. By the end of the month, they’ll definitely know the importance of budgeting and will be eager to sit down and learn how to make a functioning budget.

What tax is and how it will affect them in the future

Their business economics class will likely teach them that tax exists, but they probably won’t go into detail. And, to be honest, your teenager might not be paying enough attention to know how tax will affect them in the future. If you’re comfortable with this, the best way to start this conversation is to show them your payslip. Highlight how much the company pays you and how much you actually get out after tax. It will likely shock them and they’ll remember this when they start earning and receive their first salary offer.

Another good idea is to actually show them how to do their taxes when that time comes. Tell them what they can claim back from their taxes and show them the process you go through. It will help them out immensely in the future.

Insurance and why it’s importance

Your teenager needs to know that they’re going to have expenses in the future that they probably haven’t thought of yet. Insurance is something that might be difficult for them to understand because they haven’t experienced a medical bill or having to pay for car repairs. But it’s not just important to tell them about the main insurance policies. They also need to know that as they grow older, they’ll need to investigate different policies, like life insurance or funeral cover in South Africa.

Saving and investing

Saving and investing are vital to their financial future and you need to stress that fact to them. Encourage them to start saving at their age, even if it’s a little bit of money. They need to be aware that they need to start saving as soon as they start earning, no matter how low their income is. And, of course, there are different kinds of savings. They’ll need to save for retirement, save for an emergency and save for anything they might want or need in the future. In addition to this, you should educate them on the benefits of investing and how it works. They should be growing their money while they earn and not only sticking it in the bank. The most important financial lesson you can teach your teenager is that they should always spend less than they earn.