Encourage teens and young adults to be more independent.
During high school and college, offer guidance and support, but allow your child to control their money. Sometimes, this will lead to mistakes. That’s OK! “The reality is that some of the best learning young adults experience is by making their own mistakes when the stakes are low,” says Friedberg.
Introduce debit and credit cards.
If your child doesn’t already have a checking account, encourage them to open one and use a debit card for purchases. This way, they’ll get accustomed to swiping or using their phone to pay, but understand that the debit card will deduct money instantaneously from their account.
High school can be an appropriate time to add your child to a credit card as an authorized user, says Palmer. (It’s a good idea to make sure the credit limit is low.) This way, they’ll start to get the basics of using a credit card: interest rates, fees, a monthly bill, the importance of paying off the full balance, and so on. “It’s a credit card on training wheels,” says Schwab-Pomerantz. Try getting kids acclimated to credit card usage before they go to college or leave home.
Consider an investment account.
Forty-two percent of adults aged 18 to 29 had no retirement savings in 2018, and a quarter of all adults have no retirement savings or pension according to a report from the U.S. Federal Reserve. While working teens can open an IRA, Schwab-Pomerantz recommends having your teen start a mutual fund investment account so they can better learn how the market works, experiment, and gain confidence by investing small amounts (under $100).
Again, bring your child to the bank or open the account online together. If you go in person, financial consultants are happy to run through the basics of long-term investments with teens, Schwab-Pomerantz says. Let young adults make their own choices—and their own mistakes, says Palmer. Teens may gravitate toward investing in a single company they know by name or associate with a much-loved product. Let them do it, recommends Palmer. “If they lose money, it can be a good lesson. When they’re older, and investing retirement money, they won’t make that same mistake,” she says.
Practice budgeting and make spending plans.
This activity is great for kids between the ages of 14 to 18, says Friedberg. You want to start early so they have the tools they need to confidently manage their money when they move out on their own. “Imagine a world where every parent taught their children to earn money; make a plan for spending, saving, and giving; track where their money went; and reconcile and reflect afterwards,” Friedberg says. By practicing these skills—with parents’ help and support, both emotionally and technically—kids can work to become “truly financially prepared for the adult world,” she says.