Goal Setting for Teens

Teaching financial literacy has been my passion. Over the years I’ve had an opportunity to speak to parents who want to know how to talk to their children about money and want tips to help them become more independent before they go off into the real world.

For many parents it seems like just yesterday that your children were on their way to kindergarten, but now that they’re in middle school things seem to be happening way too fast. Tweens seem to go from having play dates to group movie dates right in front of your eyes.

And they’re fashion conscious and brand sensitive far earlier than we ever were. This is all the more reason for us to help them get a financial grip on money and the need for saving by talking to them early and often about ways to save and spend money responsibly.

Here are a few things you can do to get your tween ready for the day when you’ll need to cut the strings and watch them spread their well-prepared financial wings.

Giving your tween an allowance is a great money move. It will help you as a parent reign in their budget-busting requests while teaching them the value of a dollar and saving for the things they really just “must” have.

In her book, “Kids and Money: Giving Them the Savvy to Succeed Financially,” author Jayne A. Pearl says this about giving your children a fixed spending budget. “Allowance is an effective way to start transmitting to your kids financial literacy, values, and decision-making skills.”

When tweens have access to money they can better understand the meaning of it and the proper ways to use it. Trying to help them understand the basics of money management using something that they have earned and saved for is powerful. Often that new “thing” they just had to have when you were paying for it becomes less important to them when they come to realize that it will greatly reduce the amount of money they will have left.

If your family doesn’t embrace the allowance concept but still wants to help your children have first-hand experience with money management, another way to teach tweens about money is through interactive learning experiences and board games such as:

Life
Payday
Monopoly Jr.
The Allowance Game and
Cashflow for Kids

These are all wonderful ways to teach lasting lessons in an entertaining way. Not only will these games help your child strengthen their math and problem solving abilities, they’ll also understand basic money concepts.

Finally, encourage your children to save with a purpose and if possible offer to add a small percentage to whatever they have saved. This teaches the lesson of compound interest and how money grows if left untouched.

The next time your child wants a new bike, skateboard or series of Karate lessons use it as a chance to challenge their desire for what they want by having them save for it. As an extra incentive agree to match their savings dollar for dollar up to a set amount or a specific period of time.

The benefit of this to you is that your child will develop discipline and a habit of not spending every dime they get their hands on. Plus, when you make the goal one that’s reachable even if they fall short, you can assist them so they will be encouraged to try again next time.

The biggest thing to remember is to encourage their new saving habits and find ways to support them so they’ll actually think of it as something fun. Once that happens you’ve created a situation that will develop a positive attitude toward saving for a lifetime!

Whether it works or not, whether you believe or not is irrelevant. Their was one study that all the famous self help gurus would recite about a study in 1953 at Yale. The story goes like this: In 1953, researchers surveyed the graduating seniors at Yale to find out how many had specific goals, written down, for their future. 3% was the response. The same researchers went back twenty years later, polled the surviving members of the class and found that: the 3% that had set goals, and written them down, had accumulated more wealth then the other 97% combined!
Some claim this story as the truth, and some claim it to be made up, a myth created by the gurus to show unbiased proof that it does work. True or false, if you talk to successful people in their industry, you will probably find some had set goals, and some did not.
The one true thing about setting a goal, and writing it down is this: It sets your mind and body down the right path to accomplish the said goal. It’s easier to develop an action plan, when you know where you want to end up. Just like going on a trip to somewhere that you have never been before. If you just get in your car and start driving and hope you’ll arrive at your destination, well you may make it or not, but a destination that would take 8 hours to get to, may end up taking you 15 or 20 hours. Same goes for your plan to succeed in your chosen business. Why take twice as long if you don’t have to?
Once you have an end goal set, just work backwards to get your monthly or weekly goals or actions that you will have to take to reach it. If you set a yearly goal of $100,000 in sales, and you sell ABC Widget for $50 each, then work back to find your monthly, weekly, daily and even hourly actions that you will need to take in order to reach $100,000 in sales. $8333 per month, $1923.00/week, $274.00/day, $34.00/hour. Now if you’ve never made $100,000 before, it may seem a little daunting, but if you work back and see that you only have to average $34/hour, not even 1 ABC Widget per hour, then your mind is more easily convinced, and proceeds on the path to achievement. What the mind can conceive, it can achieve!
Although there may not be any hard proof, such as the Yale study of 1953, setting goals, and writing them down, will help you accomplish almost anything you want. Having a plan and doing the daily actions on a consistant basis, will lead you to success, in whatever end goal you are setting.

The population with the largest increase in bankruptcy rates in 2004 was young adults under the age of 24! Teens and young adults must learn about financial skills earlier than most parents think.

Financial literacy includes having a working knowledge about the issues everyone faces regarding money – getting money, spending money, and keeping money. Too often information is only focused on two narrow aspects of these large topics, budgeting and investing in the stock market. The skills that everyone needs to develop in order to be financially literate in today’s world are much more complex than that. Let’s take a look at each of these topics and what they mean to young people.

Getting Money – In the U.S. economy, getting money usually means earning a wage. Young people need to understand that what you earn is generally dependent on the knowledge and skills you possess. The typical American high school curriculum that just gets you a diploma does not usually develop any particular knowledge or skill set that will increase your earnings in any substantial way. There are programs in many schools that may develop some degree of skill specialization, or prepare you for higher education. These are the immediate goals for young people in order to address their future financial needs.

Additionally, the concept of compounding interest and the time value of money is a critical foundation for understanding the benefits of saving and investing and the drawbacks of borrowing. Time is on the side of youth in this country, but they need to know about the opportunity to start saving and the power of compounding to take advantage of the circumstance granted to everyone.

Spending Money – In 2005, Americans spent more than they earned. That might lead one to believe that we know how to spend! We do, we just don’t do it well. In order to spend money well we need to be aware of our goals, short term and long term, and make decisions that support the attainment of those goals. Spending happens on a daily basis for most of us, but are we really thinking about the things we want when we spend our money?

Spending money also means knowing how to take on debt in a manner that is appropriate. Discovering what financial strategies fit well with your personality and temperament will go a long way in making solid, consistent decisions. That in turn allows for credit scores to remain high enough to provide benefits on insurance rates and loan rates.

Consumer protection, identity theft, phishing, risk management, and predatory lending are all topics that everyone needs to be aware of in order to be financially successful today.

Keeping Money – A long time ago, you could put your savings under your mattress and you were set for most financial situations. Today, not only do you need to save, but you need to put your money to work for you. Discovering what investing tools motivate you to stay informed and on top of your investments is vital. That motivation also spurs you to continue to save. This positive spiral allows financial success. Not knowing what to do, investing poorly and loosing money, or putting your money in someone else’s hands are setting yourself up for failure. Investment decisions are yours alone. There is plenty of advice floating around. How do you tell the good advice from the bad? You need a basic financial knowledge. That will eliminate most of the risk of falling for a scam.

You also need to know how to keep the money that you make through your investments. With plenty of tax plans to assist with this, deferring or eliminating much of the tax consequences of making money through investing is available to everyone, not just the very rich.

But if you have developed basic financial literacy and live according what you know, you will be rich.

Finances and budgeting are almost never taught in today’s educational system. Although our kids learn advanced algebra and the history of economics, they rarely get the practice they need learn how to make a budget, stick to it, and start saving money as soon as they land their first job. Add to this the practice of credit card companies in targeting 18 year-olds and other college-bound youth, and the result is a potentially dangerous combination of irresponsibility and mounting debt.

This means that it is the job of parents – and the finance industry – to make teens responsible about money. And while it might seem complex to teach fiscal responsibility to a generation known for acting first and thinking later, responsible money management is one of the most important lessons you will ever teach your kids.

What to Teach Your Teens about Money

The most important thing teenagers – and adults – need to learn about money is that it is important to set goals. Telling your teen that he or she needs to take 10 percent out of every babysitting paycheck and put it in a savings account only teaches them that they need to listen to Mom or Dad. Urging them to save $1000 to invest in mutual funds along with your own investments allows them to visualize a goal and calculate what sort of returns they can expect later on down the road.

Seeing those numbers written down on paper can go a long way in solidifying a teen’s comprehension of finances. After all, safely invested money looks much like free money after awhile, and when your teen combines this type of goal with the goal of a large purchase he or she wants to make – say, a down payment on a car – he or she will have double the incentive to save.

Learning to Budget Early

Most teens should also learn the value of budgeting. In today’s society, the general urge for teens is to buy first, and ask questions later – and Mom and Dad will take care of the rest. Whether a purchase is made on a credit card or at the expense of this month’s gas money, many teens are later “bailed out” by parents who don’t want to see their kids racking up bad credit scores.

While protecting your child from a lifetime of bad credit is admirable, you’re often better off letting them learn from their mistakes. Have your teenager make a budget and stick to it. If he or she goes over, resist the urge to provide the funds they need to get by and force your teen to skip out on movies or new clothes until the budget is balanced. After all, learning about not overspending now – before your kids live on their own and the real danger of debt becomes a threat – can actually help teens in the long run.

No matter what happens, make sure you discuss finances with your teen openly and honestly. Allow teens to make mistakes, but require them to evaluate and learn from those mistakes. After all, fiscal responsibility is something than even many adult struggle with, and you’ll help your kids the most by starting financial planning early.