Finances & Teenagers
Hello Martinis and Your Money Listeners! Today’s podcast episode was inspired straight out of my own experience of transitioning my 17-year-old son, Will, from a car passenger to a licensed driver. Bill and I have been talking about this in theory for over a year now as Will has been practicing driving and taking classes, etc. but I’m not sure anything really prepares you for it until it hits you straight in the face. Over the years, I have witnessed clients' expectation of kid costs to decrease over time, only to realize that some of the early large expenses like nannies or daycare just wash over into camps and sports as they age and then ultimately car insurance and college costs as they continue to age. Joining me today is my great friend and work wife for life, Alicia Lazarto, to talk about how to prepare and manage your family’s finances with a teen and also how you can set your teen up for success once they leave the home.
What are we drinking?
Alicia - Veuve Champagne
Shannon - Pommery Champagne
Podcast Notes
Shannon was inspired to record this episode from her personal experience and offline conversations with Alicia. They’re both mothers of teenage boys, which leads to unique financial challenges. From car insurance to dating to college, the teenage years are prime learning opportunities for families.
Car Insurance:
When a teenager starts driving, all types of new costs arise. Preparing ahead of time is ideal. Call your insurance provider or check online to see what adding someone to your plan will cost. They won’t charge until you hit submit, so don’t be scared to research.
Once you know the costs, discuss how you will pay for them as a family. Teens must understand driving costs and how insurance rates change depending on your record.
Some folks choose not to have insurance, but The Gym highly advises against that.
When teenagers are driving, your stress level is through the roof because there are always unanticipated events even if you do all the right things. Things like fender benders, crashes, breakdowns, or speeding will all happen. Alicia’s son was pulled over and got in trouble for driving outside county lines, which is not allowed if you’ve had your license for less than six months in New York.
Teen Finances:
By high school, you must have regular money conversations with your kids.
Get them involved in the household budget; it helps put things into perspective. Teach them how much things cost. They’ll have to pay bills as adults in a few years, and they can learn much from being involved.
The sooner you can create economic systems with your kids where they can earn, spend, and save money, the better off they’ll be.
As Alicia’s kids grew up, when they got money for holidays and birthdays, they would put 70%-80% of that money away. As they got older, it was more challenging, but they continued to encourage the saving habit. When it was time to buy a car, Alicia’s son had money saved and could purchase the nice car he wanted.
Alicia set up custodial accounts when they were kids because they had great rates. They got the kids involved in the deposits and made it a fun game.
When he got his first part-time job and wanted more spending money, Alicia’s 70% savings rule changed to 50%. He learned money quickly goes when it comes to buying a car, insurance, etc.
Once kids start working and earning income, it’s time to have the Roth IRA conversation.
After the car, the next conversation is about preparing for college. Shannon recently did an episode about this with Joanne Sullivan.
These are all great opportunities to have money conversations and learn together.
Having Money Conversations:
Kids are always listening. The earlier you start having conversations with them, the better. They’re learning whether you’re teaching them directly or not.
It’s our job as parents to create boundaries and watch our kids experience discomfort and pain. We want them to be in a safe environment doing so, which is why learning these lessons at home is a great opportunity.
Remind your kids what happens in someone else’s household is not what happens in your household. You don’t have to keep up with the Joneses or be embarrassed if your family looks different from other families.
Alicia is a helicopter parent when it comes to finances. She wants to give them the right tools to stand strong on their own. It’s all about laying the groundwork financially.
It’s essential to have money conversations at all ages and stages, especially in high school. If you don’t teach them how to stand on their own, you’ll take care of them for a long time as things arise.
Share this episode with your friends who are parents of teenagers. One of the best things you can give your kids is confidence in their finances.
Life360 is an app that you can use to monitor your kids’ location, which is helpful when they start driving!
Other Martinis and Your Money episodes related to kids and finance:
Takeaway: My biggest takeaway is the importance of financial transparency from an early age with children. How can we expect to raise financially healthy kids if we don’t let them see the impact of finances on the household?
If you have any topics you would like me to cover on this podcast, or if you’d like to get in the financially naked hot seat, I encourage you to email me at Shannon@fingyms.com, or join the private Martinis and Your Money Facebook group, and let me know what you want to hear.
The beginning of the year is a perfect time to set goals and make plans for where you want to go in the next year. And if you have kids, then you’ll definitely need to do some more planning. You may not actually accomplish all of your goals, but I’ve witnessed amazing results happen over the last 10 years when people set out to make financial health a goal of theirs. A financial health journey can be long and feel lonely at times, but if you or someone you know would like to have a supportive best financial friend along for the ride, please check out financialgym.com. With memberships starting as low as $35 a month, we are the inflation-proof source for financial wellness for anyone. So head over or send friends to financialgym.com and schedule a warm up call today. As a reminder, our warm up call team is staffed with amazing and current Financial Gym clients that can answer any of your questions about our program without any pressure to join. We know that Financial Gym is an investment and we want to make sure that you’re confident in the choice you’re making before you commit.