Let the recession be their teacher
Talk about silver linings. Though of course we'd rather not have to deal with the many downsides of a recession, these times can serve as a valuable training ground to teach your teens some key life lessons about money and investing."The financial values you impart to your teenage children now can really resonate in this environment," says Neale Godfrey, author of Money Doesn't Grow on Trees: A Parent's Guide to Raising Financially Responsible Children.That said, consider these seven tips for boosting a teen's financial literacy:• Get the investment ball rolling. Don't let your son or daughter assume that investing is a bad idea, simply because he or she is coming of age during a time of recession. Discuss how investors who held on through short-term ups and downs have made money over the long run. (For example, stocks have had a positive return during every 20-year period since 1926.) You might also encourage your child to discuss the roles of saving and investing in helping them reach their life goals.• Set up a family-style "company match." Make your kids an offer: Encourage them to save a portion of their allowance, paycheck from a part-time job or gift money, and match it. For example, contribute 50 cents for every dollar they put in a savings account or piggy bank. They'll save more money as a result, while also getting a head start on the principle of an employer matching 401(k) contributions later in life.• Foster practical shopping skills. Take advantage of everyday opportunities to help your teens become savvy shoppers. When grocery shopping, make a list before you go to prevent impulse buying. Once there, take the opportunity to give a lesson on unit pricing and the cost differences between generics and brand-name items. When shopping online, leverage the Internet's search powers to show how several merchants may offer the same item for a wide range of prices. "They'll quickly understand the importance of not simply grabbing the first thing they see," notes Godfrey.• Give them a vote. If you're planning a family vacation or making a major purchase, ask your teens to hunt online for the best deals then present you with their findings. They'll not only learn the practical lesson of how costly it can be to take a family vacation, buy a billiards table or a home theater, but also gain a firsthand understanding of how the household makes financial decisions.• Share some debt management techniques. Most financial firms won't let children under age 18 get their own credit card. But you can show a teenager how you manage your credit effectively - for example, by paying the bill in full each month. You might also consider adding him or her as an authorized card user. Doing this provides experience in spending and managing credit card debt. Just be sure to establish extremely clear rules about when, where and how your teen can use the card.• Discuss needs vs. wants. Encourage your kids to sort out what they think they need from what's truly essential - and to make choices accordingly. Before they buy something - or you buy it for them - make them consider how much they will use it, how long it will last and the motivation for purchasing it. Is it a status symbol or a must-have of the month in their social circle? The process of establishing value in this manner is a key component of financial health.• Lead by example. Most importantly, kids pick up on your actions more than on your words.The upshot? All your encouragement (or tough talk) about the importance of living within your means and delaying gratification won't mean much if you don't "walk the talk" yourself, says Godfrey. As an adult investor, you've likely learned the many long-term benefits of a relatively short-term malaise. And as we ease out of what can easily be called the worst such malaise of our lifetimes, you have a golden opportunity as a parent to teach your teenage children how to provide for the financial storms they'll also encounter.Don Sommese, a certified financial planner who works in the Manchester office of Morgan Stanley Smith Barney, can be reached at 603-629-0233.