I wonder how many parents are transparent when discussing their finances with their teens and young adults? Although I can see arguments related to both financial transparency and secrecy, I’ve chosen to be open with my daughters about my own personal finances. They know my annual salary, but most importantly, they have had a chance to see the real life costs that help to “absorb” the aforementioned salary. If I only divulged my income but not the expenses, there would be no context to provide meaning and draw accurate conclusions. If I told them that I made “one brazilian dollars” last year, that lone bit of information might give them the impression that we will soon be hanging out with Oprah or Warren! However, a quick analysis of expenditures might show that last year, I spent “one brazilian one thousand dollars”. That additional piece of information dispels the initial illusion of wealth and paints a bleak picture of debt instead!
Here are some ways that you can be transparent and help your teen or young adult learn practical and relevant life skills:
- Let them assist with planning the family budget. Including them in the process will help them learn to think through all the details of what “life” costs. This will help them understand the difference between wants and needs, fixed and variable costs, and how to manage periodic costs.
- Give them exposure to health care insurance policies and help them to understand how insurance works. My girls have both learned a lot about HMO’s in the last year or so. They have personally lived the difference between a PPO and HMO and are now better equipped to evaluate which one they prefer.
- Let them pay for their own car insurance. Let them learn, firsthand, the impact that citations and accident claims have on their insurance rates. Conversely, show them the positive effect that being a “good student” has on their rates. Show them how bundling insurance policies can save money.
- Include them in meal planning. This skill goes a long way toward saving money on the food bill.
- Give them the opportunity to work with you to ensure that you are getting the best plan for your wireless carrier, cable and internet. Make sure they understand how the cell phone charges are broken down and exactly what happens when they have exceeded their data limit. I let my daughters know what their data allotment is for the month. They know that whomever exceeds it will be paying the excess data fee. I’m very happy to delegate Data Policing!
By providing them with the opportunity to preview your personal finances, your young adult will become more proficient in evaluating how to spend their own money and will be more skilled in making real life, relevant decisions.