Six Things Your Teenagers Need to Know about Finances.

Here’s six of the things I hope they know:

1] Don’t go into debt!
The two deadliest killers of a young person’s finances are credit card debt and car loans. Teach your teens - do not go into debt. We live in an instant generation – we want what we want now! Teach your children to work out the true cost of anything they purchase. That means calculating the interest (at a compounding rate) on any credit card purchase. It is easy to do this, there are loan calculators at www.sorted.org.nz

I’ve written about car loans before – the problem is a car bought on finance will usually cost you a good deal more than it is actually worth. Some cars even get to a point where the amount of finance owing is greater than value of the vehicle.

By the way, another mistake many young people make with vehicles is not having at least third party insurance on their car.

2] Financial freedom and debt are arch-enemies.
I know it sounds like I’m repeating the first point but it is so vital. In New Zealand today the average person is spending $1.17 for every dollar we earn – that does not include mortgages. This will, as time goes on, have a severe affect on society and our standard of living.

Teach your children – if you do go into debt, pay it off as quickly as possible. That can be best done by paying more than the required monthly repayment on any loans you have. Of note, are student loans (click here to see our article Dealing With Your Student Loan). Just because there is no interest doesn’t mean this is not a debt. The bank will count it as a liability when applying for home finance etc.

As for repaying a home loan, the same applies – maybe tell your children about MortgagePlan.

3] Count the cost of financial freedom daily.
One of the things we major on early in the enspire financial mentoring course is the need to get rid of spending leaks. Spending leaks are all those small unplanned expenses – a cafe lunch here, a impulse buy at the clothes shop or CD store, a chocolate bar at the gas station when buying petrol for the car. These things all add up. We need to teach our teens that plugging those spending leaks can, over a period of time, add up to a lot of money saved.

It’s not that we’re saying, “don’t enjoy your money.” We’re just pointing out the reality that wise choices can mean money saved for some exciting purchases later on. For instance, save $10 a week while at university and, over a three year degree, you have saved the airfare for a trip to London!

4] Choose your course of study wisely.
When I went to university it was free (both times!). Times have changed and all three of our children have small student loans. Young people need to think carefully about whether what they study is really going to be of benefit to them. Sure, there will be times when a person undertakes a course of study only to discover it is not quite what they wanted, but the day of trying things out for the fun of it have gone.

For those out there who are parents of teens, here are a couple of things we found valuable; The first was, when each of our children were in their second to last high school year we paid for a full psychometric test. It cost about $300 and measures IQ, personality, gifts, talents, etc. A week after the test they sat for an hour with the ‘examiner’ who talked about the things they were good at and what careers would be best for them. It helped them decide on the best courses for their last year at high school and enabled them to set direction for the future.

The second thing we did was allow our son to take a break between school and university. He was, despite his psychometric test, still unsure of a course of study but was keen to work in a particular industry. He secured a job in that field and found he didn’t like it. He then chose to go to university to study the very subjects the test had suggested would be good for him – he’s about to graduate and has loved every minute of it. It also gave him time to save up some cash. He will graduate with a student debt he could pay off in a matter of months.

5] Know where your money is being spent.
Most people keep very poor records of where their money goes; and would be shocked if they really knew!

Keeping track of your finances has never been easier, especially for computer savvy teenagers and young adults. We recommend www.whostolemymoney.com, a New Zealand based tracking system that has been reviewed in previous newsletters. There are other systems however. There is Microsoft Money. For ASB customers, there is a money tracking programme on their website. Not only are these programmes easy to use, for those who enjoy the computer, they can be a lot of fun.

6] Give some thought to the future.
Young people tend to think little about tomorrow but, as those who are a little older can testify, time goes quickly. It is not long before they will be wanting to buy a car, or travel overseas, or to purchase their own home. If debt is to be avoided these things need to be paid for in cash – that means saving now.


It also seems rather strange to think about at a young age, but teens need to be reminded that one day they will retire and will need to have given thought to how they will provide for their future. It’s never too soon to talk about savings, insurance and investments.

I hope this is some help. Finance is an area that is not taught in schools and often overlooked in the home. Most of us will have learned from mistakes we've made with our finances, let's try and ensure our children don't make the same errors.

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