Teaching teens about money

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As students prepare to transition into the adult world, Modern Woodmen of America representative Morgan Lavender discusses five topics to review with recent high school graduates.

Knowing how to write a check might seem obvious, but not if you’ve never had to do it. A growing body of research points to a lack of such seemingly basic financial knowledge among today’s teens. Though check-writing is becoming rarer as people handle more financial tasks online, if teens have never learned how to write a check, what more important financial concepts could their young minds also be missing?

Arming your teens with a foundation of basic money-management skills is important. The following lists a few topics for parents to discuss with their children. Parents, even if you’ve had these conversations in the past, it never hurts to brush up – and if your teen responds with the ever-present eye roll, dare him or her to write a check and prove you wrong.

Opening and using checking accounts. Beyond a check-writing tutorial, explain the purpose of checking accounts (and the responsibilities associated with them) as compared to savings and other account options.

Whether your turn already has an account, or is opening one for the first time, make sure he or she understands the account’s minimums, fees and features. Review how to keep the account secure and explain the difference between a debit and credit card.

The pros and cons of credit cards. Does letting your teen have his or her own credit card teach responsibility, or does it lead to early issues with debt? The answer likely depends on the maturity (and spending habits) of your child. Regardless of your stance on that debate, recent graduates are often inundated with offers. Talk through the pros and cons of credit cards, helping your teen make educated decisions before responding to offers. If using a card, stress the importance of paying the balance in full each month.

Living within your means. Talk about the importance of saving money for the future, having a budget and sticking to it. There are many online budget management tools out there, but a simple paper and pencil method works, too. Your teen’s spending plan should list savings, wages and parental contributions, as well as everything he or she spends each month on bills, loans, school supplies, eating out, personal care items and entertainment. To help your teen stick to the plan, encourage him or her to spend money on needs first (not wants), stay in and cook rather than going out when funds are tight, unsubscribe to monthly streaming services that are not really used, pay in cash when possible instead of using credit cards, buy or rent used textbooks online at the college or local bookstore and then sell or return the books after the semester – if that is a possibility and the books are no longer needed – and form the habit of saving now. Even a little bit can add up over time, and be a lifesaver should an emergency arise.

The importance of life insurance. If you purchased life insurance for your teen in his or her younger years, explain why you did so and explain why it is a good idea to keep the coverage once ownership transitions to him or her. For permanent life insurance plans, the cash value could be tempting to those with student loans and car payments. Taking a loan against the cash value is an option, but that could have unintended tax consequences and cashing out the certificate (policy) entirely may not be in your teen’s best interest for the future. For example, the plan likely has lower, locked-in premium rates. It also may provide guaranteed options to purchase additional coverage, regardless of health.

Medical power of attorney. While you may consider your 18 or 19-year-old your baby, he or she is an adult in the eyes of the law. You cannot assume doctors will consult or even notify you if your child ends up in the emergency room. In fact, they may not be able to do so  legally. A good step to take when your son or daughter turns 18 is to complete a medical power of attorney document. This allows your teen to appoint someone to make health care decisions on his or her behalf. Some states also require a HIPAA authorization form. You can download these forms from a variety of online sources. Talk to an attorney for more information.

While financial conversations with teens can be tough, a Modern Woodmen representative can be a great resource, happy to meet with you and your teen to answer any questions.

Submitted by Morgan Lavender

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