Money-Makers: Simple Ways Your Teen Can Earn and Learn About Money

Reading, writing, and arithmetic may be covered at school, but for most kids, it's up to parents to teach them about how to handle money at home. If you have a teenager, right now is the optimum time to teach her about investing and money management before she heads off to college. Susan Sharkey, director for the High School Program for the National Endowment for Financial Education, specializes in teaching teens about money. She shares some ideas on the topic.

Kids tend to pick up their spending habits from what is modeled at home, but don't think your own finances have to be in perfect order before giving lessons. Make it comfortable to talk about money issues at home. Involve your kids when you plan your family budget, or give them the task of comparing cell phone plans—something they should find very relevant. The key is to recognize "teachable moments" as they come up in life.

Working up to 10 hours a week can help teens learn about money and time management without interfering with "being a kid." Research also suggests that students who work less than 20 hours per week are more likely to go to college than those who work more than 20 hours or don't work at all, according to the U.S. Department of Labor's Report on the Youth Labor Force in 2000.

Once your teenager gets a sense of what it takes to earn a dollar, you can frame potential purchases in terms of their "work value." For example, is that new pair of designer jeans worth five hours of selling burgers? Help your teen find work relevant to his interests. For example, if your teen wants to be a veterinarian, he might like a job at a pet store. Look for employers who have a good reputation for working with youth.

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Part-time jobs aren't the only way your teen can earn a buck. He can learn what it's like to be self-employed by baby-sitting, mowing lawns and tutoring. Show your teen how to research the going rate for the service he is providing. Make sure he understands there can also be expenses involved; for instance, mowing lawns requires a lawnmower, trimmer and gasoline.

Start a joint checking account with your teenager before she goes to college. Having an account helps teenagers to get accustomed to being responsible for their own money, and you are able to monitor the account. Let your teenager make payments, write checks for expenses and make deposits.

Teach your kids about money management while they're still at home. Here's a suggestion from Sharkey: at the beginning of the school year, calculate expenses for the semester. Include costs for school tuition, if applicable, along with sports equipment and entertainment. Give that amount to your teen and help him plan a budget. "For most kids," says Sharkey, "their future is next Friday." So help them plan ahead and think of contingency plans. Ask them, "What will you do when it's prom time and you've run out of money?"

To encourage saving, make a deal with your teenager to make a contribution every time he does. You can offer to match what he saves or to contribute a percentage, say half. By monitoring the savings account, your teenager will get a good idea of the benefits of investing in a 401(k) or other retirement plan as an adult.

Search for financial calculators online and crunch some numbers with your teen. Some companies that administer Roth IRAs will let your teenager open an account with an initial deposit of $2,000. If a 15-year-old were to invest $2,000 a year into a Roth IRA for five years, she would have almost $1 million at age 65, if the account earned a little more than 10 percent annually, according to the financial education endowment.

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Credit card companies can look awfully tempting to a college student during orientation, with their colorful booths and free T-shirts. To avoid having your teenager fall prey to early credit card debt, arm him with information while he is still at home. Demonstrate how credit cards charge interest and the consequences of debt. If your teen is ready for a credit card, get one with a low spending limit, such as $500, and designate it for emergencies.

At one point or another, we've all felt the pressure of keeping up with the Joneses. Your teenager feels that pressure, too. Talk to your teen about differences in money values. Explain that people spend money on different things, and that it may be difficult to stay on budget when friends are eating out or shopping every day. Encourage him to stay on track. Sharkey recommends the website Spendster.org—which features people "confessing" what they waste money on.

Chances are your teen doesn't hang on your every word like she did when she was younger. Don't give up. As Sharkey says, "Teens are listening. They just don't necessarily want you to know they are listening." If you are friends with another like-minded parent, you might give this a try: Teach each other's kids. Or enlist the aid of an aunt or uncle. Sometimes your teen just needs to receive the information from a different source.