The best way for parents to instill good financial habits in teens is to lead by example.  By living within your means, spending conservatively and focusing on the long term building of wealth, you are providing good lessons for your teen. 

At the present time, only three states in the nation require students to learn basic financial management as a high school graduation requirement and 17 require financial management to be incorporated into other subject matter.  Therefore the burden of this important life lesson falls on parents. 

The most important topics to discuss with your teens include;

      Budgeting basics.  Teach them to budget regularly by knowing how much money comes in and how much goes out.  Most teens have an income or receive allowance and have expenses like gas for a vehicle.  

      Living within your means.  Peer pressure persuades many of us to fit into a group like wearing trendy clothing or having the latest designer cell phone.  Problems happen when people cave in to the pressure and do not prioritize their needs and wants.  Help your teen understand needs are things that are required to live and wants are things we desire that are not necessary.

      Banking.  Educate your teen on banking basics such as the differences between checking and saving accounts, writing a check, using the ATM, writing a deposit or withdrawal slip, keeping track of the balance and reconciling a bank statement.

      Paycheck information and deductions.  Discuss the difference between gross income which is what you earn before deductions and net pay which is what you take home after deductions.  Also discuss deductions such as Social Security, Medicare, Federal Income Tax and possible insurance premiums.

      Federal Income Tax.  As an employee, help your teen understand the purpose of the W-4 form on which they indicate the number of withholding allowances they will claim.  This will determine the amount of federal income tax withheld from their pay and will be reported by January 31 every year.  Some states also require income tax and will provide guidelines on calculating deductions.

      Pay Yourself First.  Encourage your teen to take at least 10 to 15 percent or more of their income and place it in a savings or investment account.   Early saving habits help teens learn to achieve financial goals, be prepared for life’s unexpected moments, cover college expenses and even plan for their retirement.

If money management has always eluded you, it is critical that you work to improve your financial weaknesses.  One way to improve your financial habits is to take personal money management courses such as the Investing in Yourself series.  Money management courses will help you learn positive habits and, even better, demonstrate good financial practices to your young adult. 

National Financial Literacy Month is recognized in the United States in April in an effort to highlight the importance of financial literacy and teach Americans how to establish and maintain healthy financial habits.

In 2000, Jump$tart, a National Coalition for Personal Financial Literacy, began promoting April as Financial Literacy for Youth Month. Finally, in 2003 the United States Congress showed its support. Senate Resolution 48 and House Resolution 127 asked President, George W. Bush to declare April as Financial Literacy for Youth Month. At that time, governors of eight states had already named the month of April as such.

The year after Senate Resolution 48 and House Resolution 127 passed, further action was taken to designate April as National Financial Literacy Month to improve Americans’ financial and economic knowledge. April was named National Financial Literacy Month by the passing of Senate Resolution 316 with unanimous consent, championed by Daniel Akaka D-HI.

AFS has partnered with Jump$tart Washington since 2005. Both Barbara Mascarin and I have served on the Board of Directors of the Washington based coalition.

Visit our Jump$tart partner link to find materials relating to personal money management for young children and teens. The materials can be taught by both teachers and parents. If you would like to peak your teen’s interest, have them take the Reality Check.

On April 9, 2008 Jump$tart, the National Coalition for Personal Financial Literacy, announced that financial literacy among High School Seniors is still on the decline.

In Jump$tart Coalition’s biennial survey given to 6,856 high school 12th graders in 40 states, students correctly answered only 48.3 percent of the questions. This mean score is a decrease from those posted by the senior class of 2006, which correctly answered 52.4 percent of the questions.

“The survey demonstrates that graduating high school seniors continue to struggle with financial literacy basics,” said Lewis Mandell, Ph.D., professor of finance and managerial economics at SUNY Buffalo School of Management. Mandell conducts the surveys for Jump$tart.

Encourage your teen to turn off the TV, video game or iPod and take the 1st step towards becoming a financially literate adult by taking our on-line course, Your Financial Life – For Young Adults. There they can learn about the importance of setting financial goals, budgeting, credit, saving and investing, borrowing money, taxes, and much more!

If your children are younger, please take our on-line class, Children & Money Tips for Parents and Teachers. It is never too early to start planting the financial literacy seed.

For more information about Jump$tart and its biennial survey go to our website http://www.myfinancialgoals.org/ and visit our partner links!