The times are ever changing, and many things just aren’t the same as they used to be. Funerals are no exception (though you won’t hear and complaints about that from me). More and more families are planning celebrations of their loved one’s life after they pass on, rather than somberly mourning the loss.

Between that and the fact that the national cremation rates continue to rise (with an expectation of 50% by 2025), resulting in drops in the revenue that funeral homes bring in, funeral home owners are taking the hint and making some changes.

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Regardless of how old your child is, it’s never too late to teach him how to properly handle his money. The lessons that you can teach your teenager are vitally important. He is on the verge of being on his own. If he doesn’t know how to handle his money the right way, you are going to have to watch him endure years of financial woes. Take what little time you have left as an authority in his life and show him how it’s done.

Checking and Savings
Start by opening checking and savings accounts under your teen’s name. Whether she have a part-time job or just does some babysitting on the weekends, use the opportunity to show her that its better to use a checking account so that you can keep track of where the money goes.

Sit down with her each month when the account statement comes in and be sure she understands how to balance her checkbook. Explain the importance of recording every transaction in the register and figuring the current balance after each purchase or deposit.
Be sure that she understands the ATM balance shown after a withdrawal is rarely accurate and to never depend on it.

These tasks may seem common sense, but many people have no idea. I have a close friend who works in banking and she could tell you crazy stories. For example, she has many people who have bounced checks and swear by the fact that they thought there was still money in the bank just because there were still checks in their checkbook (Hello!)

Establish a Budget
Help your teen come up with her own budget to determine how her personal earnings will be spent. Determine whether she will be responsible for paying the insurance on her car, what she will be putting in savings each month, if she will be responsible for buying her own new clothes, etc. Compare her budget to the family budget so that she gains an understanding of how easy she really has it at this stage in her life.

Make a chart, indicating each spending category and how much each is allotted every month. Have your teen keep tabs on how much is left in the budget by writing down what she spends in each category and how much remains after that purchase. This will help her to know where she is overspending and to see how she can stick with it. It may be difficult for her in the beginning, but she’ll get it eventually.

Teach Real Debt
Nothing gets me more that parents who buy their teen a brand new Mustang for their 16th birthday… and, when he totals it, a Mustang convertible to replace it. Grrr. Those parents aren’t teaching their kids anything except that they can always count on daddy to get them whatever they want.

If you want your teenage to understand the real world, then teach him what it means to really be in debt. Go ahead and buy him a car, if you have the means, but get something more reasonable (say, less than $5,000) and have your child pay you back, with interest.

Make a monthly payment plan – something that is feasible based upon your teen’s income. Predetermine a percentage rate that won’t overwhelm him, but will convey the weight interest bears to him. Five percent is a good number.

Put the entire matter in writing, and be sure to include what the consequences will be for a late or missed payment (loss of driving privileges, TV time, etc.). Having a written document as a reference point helps to eliminate excuses. Also, map out a “loan payoff” chart, showing when each payment should be made and what remains on the loan after its application, all the way to zero. This will help your teen to see how much they will really be paying in the end and just how long it takes to get out of debt.

I also recommend you show them how long it would take to pay off (and how much more it would be) if they purchased the car on a credit card with the average 18-21% interest rate. I would imagine this would deter your teen from ever wanting to use a credit card for anything they couldn’t pay off each month.

In my opinion, this method is far more effective than the “prepaid card” that many parents use because the prepaid card is not teaching them the reality of debt. All it teaches is that prepayment is different from debt, but not the consequences and hardships debt can bring. Many teens end up getting a credit card anyway when they move out, without the proper education on how to handle one.

Truthfully, the possibilities are endless for teaching your teenagers about money. Anything you can do to help them understand being on their own (anything comparable to what you do) will help tremendously. Just don’t give up and don’t get frustrated. It will be well worth it to see them succeed.

Related Readings:
• BusinessWeek.com: Teens, young adults need money skills
• About.com: Teach Your Teen Financial Responsibility
• FamilyEducation.com: 5 Steps to Teach Your Teen to Budget
• FinancialLiteracy.com: Teaching Your Teen About Money

For most of my life I knew very little about how to handle money. My examples growing up were usually of living paycheck to paycheck, and, when finally on my own I followed suit for a long time. The only advice I ever received was from my grandmother who told me regularly to “save, save, save,” but never told me how to get to a point where I could actually do that.

Unfortunately, my story is all too common. Today’s children are tomorrow’s business owners and many of them will go through years of financial struggles because they were never taught by their parents how to properly handle money. I firmly believe that teaching our children about money from the moment they are able to count (around 2 years old), is vital to their future happiness and survival.

The Boxes Method
When you’re little one can count to 10, she can begin to understand money. Remember, kids learn by observation and repetition. Give her a small allowance in increments that can be divided. I recommend starting with three pennies each day. I know, pennies sound small, but that is about all that will hold their attention span at a young age. Provide her with three small boxes and label them: spend, save and give. Show her each day that she should put a penny in each.

The “spend” box is, of course, the money that she gets to spend. Buy some stickers and new barrettes or, for your little man, a packet of baseball cards or bubblegum. Give him the opportunity to buy a piece of gum immediately, or wait until tomorrow so he will have two cents to buy a baseball card. What seems like an insignificant process will help him to understand how spending works.

The purpose of the “save” box is obvious as well. Give him ideas of things he can save for and buy at the store within the next month, such as a matchbox car. Tell him how many pennies it will take and remind him how close he is to buying it each day.

Avoid the temptation to help him along by adding extra funds. At such a young age, he may get the idea that mommy and daddy will always help him get what he wants. You want him to learn personal responsibility, not dependence on you.

Using the “give” box depends on your preferences. I am a firm believer in giving to charity, whether it be offering at church or donating to the local shelter, so it’s part of my teaching strategy. I believe that giving will eventually produce a return.

For example, the Rockefellers are an extremely well-known and wealthy family. What most don’t realize is that from John D. Rockefeller on down, the family has always been predominately givers. John Rockefeller gave over half of his $1 billion fortune during his lifetime, and the tradition continues through the generations.

Get Them Involved
As your child gets older, expand the financial lessons (and the amount of allowance) accordingly. Make her aware of your family’s position on finances – explain where your money goes.

Too many parents feel that it’s none of their child’s business how their money is spent, but that attitude is all wrong. You child learns by watching you. Your attitude about finances will become hers as she gets older. Openness will only help her to learn more and be more responsible with her own money down the road.

Let your child have input on what the family saves for, such as a family vacation, summer camp, or new family bikes. Map out how much you will need to set aside as a family each month in order to reach your goal, and have the kids contribute some of their allowance savings (such as $5 a month). Show them how even a small amount helps you to get there that much quicker.

Teach Debt Early
It’s also important to start teaching your child the shackles of debt. When you child begins to ask for a luxury item, such as an X-Box, agree to purchase that item with the understanding that your child will pay you back out of a portion of his allowance (Christmas is an exception, of course).

You may even consider adding a small percentage of interest, say 2%. Seem harsh? Well, it might be to some, but it’s highly effective. He will soon realize that it’s better to save up for something big and be patient than to spend money that you don’t even have yet. This will also begin to teach him the difference between needs and desires.

But what if your child is already a teenager and you are starting to witness the repercussions of not teaching her earlier about finances? Don’t worry, it’s not too late. As long as she is still under your roof, you still have ample opportunity to teach her how to handle money correctly – before she gets in trouble out on her own.

Tomorrow I will cover how to reach a teenager about finances, even when it seems impossible.

Related Reading:
• FamilyEducation.com: 15 Ways to Teach Kids About Money