Carrie Schwab Pomerantz

Dear Readers: Last week, I wrote about teaching basic money skills to young kids. That's important, but it's even more crucial for teens to understand things like budgeting, saving and making smart spending decisions. In an uncertain economic world, these kids are going to have to take care of themselves financially. Are they being prepared? Read on for an eye-opening assessment of financial literacy in the U.S. and some ideas on how you can help your teen down the right path.

A recent financial literacy test administered by the Program for International Student Assessment should be a wake-up call for American parents. In this first-of-its-kind international assessment released in July 2014 and given to 29,000 15-year-olds from 18 countries, U.S. teens fell below half of their peers.

We're not just talking about math skills. We're talking about practical everyday financial skills like understanding an invoice, reading a bank statement, calculating interest, or being aware of income taxes. It's rare for kids to learn these financial basics in school (no matter how advanced they are in math), so it's up to us parents to supplement our kids' education with some important financial lessons.


To really get teens' attention when talking about finances, you have to give them something real to work with. For instance, the concept of making smart spending choices only has teeth if teens have to cover some of their needs and wants with their own money.

An allowance is a great way to provide this experience as long as it's tied to specific expenses, whether that's lunches, gas, clothing or entertainment. This helps kids learn to budget and prioritize. You might take it a step further by sharing your monthly budget and then helping your teens create their own budget with an online planner.

The same goes for saving. The best motivation is a concrete goal. As an example, a friend of mine was always willing to help her kids pay for something special provided they were willing to come up with half the cost. One way to help kids save is to suggest that saving be a line item on their budget.

And don't forget about college, probably the largest savings goal of all. Even if your son or daughter won't be contributing to their education, they should be aware of how much college costs and the tradeoffs you're making to pay for it.

Teach money management basics with checking and savings accounts.

Carrie Schwab Pomerantz

Carrie Schwab Pomerantz is a Motley Fool contributor.

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