The moment has come. You knew it would only be a matter of time. And it arrives so quickly. It’s time to set on the shelf the piggy bank your five-year-old once held in his tiny hands. Because those little fingers that would ever so carefully plop pennies in the slot are handling larger sums of money. While financial literacy does indeed begin in those young years as your little one saved those pennies, it’s now time to set your teen on the right path to future financial success.
How to Teach Financial Literacy to Teens
Recently, I came across this video in which a financial advisor endeavored to show his 16-year-old nephew how he could invest $500 he had earned at his job, and then using a simple formula (and historical data about the stock market), showed him how to turn that sum into over $500,000 for his future retirement. I showed this video to Ben, and then we got out a calculator to play with a few other numbers. He was quite impressed at how easy it really is to grow a large sum of money for retirement with little investment. The key is to start young and be consistent.
The reality is that our teens will not have a Social Security system to rely on the way many of our older relatives have. Not that the amount most receive for Social Security is enough to live on anyway. More than ever (or at least in the last several generations), it is imperative that our teens understand financial literacy and the absolute necessity of saving for future retirement now, at the beginning of their earning years. That’s not the only reason to teach financial literacy, but it’s a powerful place to begin.
What else do they need to understand?
It’s About Responsibility
As parents, we’ve been talking with our teens about being responsible in many areas of their young lives since they were small. But, one of the greatest feelings a parent can feel is the joy of seeing their teen handle their income responsibly. While no one can control what happens in life, we can participate by being as responsible as we’re able. Our teens will gain life skills education that will literally last them a lifetime as they take on the task of holding down a job while learning how to handle money properly.
It’s About Principles
No, I’m not talking about principle interest or anything like that (though that’s a great lesson in financial literacy as well). Rather, I’m talking about biblical principles. God has a great deal to say about how to handle finances. Luke 16:11 shows us that financial responsibility is a matter of trust as the writer asks us to ponder how if one isn’t faithful with worldly wealth is he to be trusted with true riches? And in 1 Chronicles 29:11-12, we learn that everything in the heavens and the earth belongs to God. So, really, the money isn’t even ours to begin with.
It’s About Stewardship
While the implication of stewardship is made in the paragraph above, there are specific verses about being stewards of God’s possessions. As stewards, we’re given the reminder in 1 Corinthians 4:2 that we need to be found faithful.
Truly, this is a high calling. For we are in a position to steward what belongs to not just any king, but that of the King of kings. With this mindset, it may help our teens to consider the importance of stewardship.
Debt Places Us in Slavery
I could say a lot about debt right now. I grew up with a single mother who always owed money on credit cards. I was never taught the dangers, and I am embarrassed to admit that I entered my marriage with $18,000 in credit card debt myself. While my extremely financially responsible soon-to-be-husband was not crazy about the idea of paying off that debt, he did so with much grace and thus begun my financial education. It is a blessing that he was able to do that for me. I had already lived many years as a slave to that debt, paying high rates of interest and never having money to give as I would like to have. We have never carried debt, except a mortgage, in the 21 years of our marriage because of his commitment to paying cash for everything. I am thankful for the lessons he taught me, and this life experience is part of why teaching our son these truths are so important to me.
It is necessary for our teens to understand this principle about borrowing because they are hit hard as they become young adults with the temptation to have more than they can afford by using credit cards. But the Bible teaches us that as a result of borrowing, we become slaves to the lender. And my own experience confirms that.
Truly, it’s wise to be patient and save up for what we need or want. It is character building as we practice delayed gratification. We must be sure to teach our teens the principle found in Proverbs 22:7 about this matter.
Additionally, we’re not to take on sureties for debts. I have several friends who helped their young adults buy brand new cars by cosigning their loans. I was a recipient of such myself as a young adult. While cosigning is a very common practice today, Proverbs 22:26-27 warns us against such practices. Most people cosign out of a good heart that wants to help, but ultimately, doing this may lead to your own financial ruin and cause you to lose the possessions you are stewards over. It’s so much better to follow God’s wisdom about such matters. And instead, encourage saving to pay cash and pray for God’s provision and timing.
Practical Financial Application
While all of those are important spiritual applications, our teens understandably need to learn how to apply practical applications as well. All things considered, our teens need to learn how to establish a budget, balance a checkbook, save and invest, spend wisely, give charitably, and more. And they need to learn how to be content. Sooner or later, they’ll be on their own and will need to practice self-government over their finances.
The time will come when you will not be readily available to oversee your teens finances, and you sure don’t want to be his safety net when he makes big mistakes.
One resource we are using in our homeschool to help make sure we cover all the bases in a God-honoring way is called Financial Literacy from a Christian Perspective by Sara Hibbard Hayes. This course is designed to introduce teens to the principles of personal finance through textbook instruction, online articles and videos, and interactive exercises. This course takes the idea of consumer math many steps further by engaging teens in lessons they can apply to life right now as well as teaching lessons for future financial responsibility, all with honoring Christ as the goal.
As a bonus, we are using it for one credit in high school math. Financial Literacy from a Christian Perspective covers all the main points we didn’t want to miss — budgeting, banking, credit, saving, investing, taxes, and even things like career choices and insurance. This is not a simplified tool for an easy credit. It is college-prep worthy and very comprehensive. This tool, along with your own life experience, is more than sufficient to teach financial literacy to your teen.