Knowledge Hoop

Last week’s Post focused on financial gifts for young children.  As I reviewed the hits on my blog and the terms that people used in search engines, I realized that a post on financial gift ideas for teens would be beneficial as well.  For most teens, a gift card or money is a welcomed gift, but what happens when you ‘fork’ over the cash?  While I guess it qualifies as a financial gift, in most instances, the gift does not last beyond the holiday break.

 I’ve lost count of the number of times that I’ve heard parents say their teens do not have good money management skills.  As a parent of a young child, I will admit that I don’t have the personal experience of raising teenagers.  However, I do believe that parents often contribute to their teens’ money habits through the act of setting boundaries or giving in to their every whim.  If you’re looking for ways to teach your teens about money and investing, the following gift ideas may be helpful:

Contribute to a 529 Education Savings Plan or purchase a Certificate of Deposit (CD).  If asked, your teen will likely say, “Give me the cash now!”, but this type of monetary gift will serve as a lesson in understanding the ‘big picture.’  As your teen prepares to transition to college, I am a firm believer that they should have some ‘skin in the game.’  Even if you have invested and planned for your child’s education, it’s important that they understand and appreciate the sacrifices you’ve made on their behalf. 

A 529 education savings account is a tax deferred investment account that is designed to help families save for future education expenses.  If you haven’t set one up, there’s no time like the present.  If you decide to purchase a CD, it’s important to shop around.  A CD is a type of account that yields a higher interest rate than most savings accounts, and requires that your initial deposit is invested for a fixed period of time.  If you’d like to compare CD rates, bankrate.com offers up to date information on rates and reviews.  Please note that most banks will charge an early withdrawal fee if the CD is redeemed before its maturity date.

Purchase a book on investing and open an investment account.  We often feel that we have to have a lot of money to begin purchasing stock.  I recommend starting small.  Sharebuilder is a great option for someone starting out because there’s no minimum deposit or investment amount.  In addition to allowing you to invest ‘your way,’ the site has a plethora of resources that can assist you in making sound investment choices.  A book that has received good reviews and may be helpful to teens is The Motley Fool Investment Guide for Teens: 8 Steps to Having More Money Than Your Parents Ever Dreamed Of .  This book along with an initial deposit in an investment account may be a good igniter to help your teen begin investing in their future.

Purchase the Pretend and Play Checkbook.  This gift was featured in the post, Financial Gift Ideas for Young Children.  While your teen may perceive this as a joke, the gift can serve a great purpose.  If your teen is preparing for college, in all likelihood, they will have a checking account at some point.  This ‘checkbook’ can be used to practice managing their money for college preparation.  For instance, as a part of the gift, I recommend adding a beginning balance.  The money should be ‘earmarked’ for college expenses (e.g., college tours, applications, etc.)  As they begin to incur expenses, help them manage this ‘account’ by adding deposits on a periodic basis.  Their ability to manage their Pretend and Play Checkbook will assist them in managing the real thing.

Purchase the game of Monopoly.  I’m sure that we’ve all played Monopoly at least once in our lifetime.  Why is this important?  The game of Monopoly teaches players how to strategize and the art of negotiation.  It also teaches the most important factor in purchasing real estate – location, location, location.  Although this game is older than many of us, it is still relevant. 

I hope these gift ideas are helpful.  As we prepare to give, let’s also look for opportunities to educate those we love.  While they may not welcome your new approach to giving, they will thank you later.  We’ve all experienced being a teenager and assuming that we knew what was best.  As we matured, we realized that our parents did know a ‘thing or two.’  Your teen will arrive at the same revelation at some point; it’s only a matter of time.