Teaching Your Gen Z Kids About Money: The Top 10 Things To Know
There’s not much you can teach Generation Z that they can’t find out themselves. They are digital natives, after all — with YouTube, TikTok, Instagram and more, there’s an answer around every corner. However, who is giving the advice could mean the difference between teaching your child to fish and them being catfished by a fake financial pro online.
To help navigate these waters, GOBankingRates put together the top 10 things Gen Z should know about money.
1. Learn the Value of Money and How To Manage It
Preteens and teens should be learning the value of money, how to save and the importance of money.
“I believe learning how to manage money is just as important as learning to read and write,” said Holly Reid, an award-winning author, speaker and financial educator dedicated to coaching school-aged kids and their parents on their journey to creating a financial legacy. “Money management will serve your children well if mastered, or it can work against them if the money lessons are omitted or dismissed.”
2. Know the Difference Between a Want and a Need
No, you really don’t need that new smartphone. You want it. Learning to be disciplined about big purchases can add up in the long run. It also will teach the value of what’s important in life, and many times it isn’t materialistic stuff.
“Preteens should practice patience and self-discipline when it comes to spending money on the things they want or desire,” Reid said. “I encourage parents to set expectations and provide guidance on how your child should allocate money they earn or receive as gifts. Consider using the 70-20-10 rule to coach your child to spend 70%, save 20% and give 10%.”
3. Make Your Piggy Bank Your Friend
With apps that make it easy to add funds to their digital wallets, Gen Z is already a step ahead. The important thing is to get them to practice saving on a consistent basis — whether it’s an allowance or their paychecks.
“Start saving a portion of your checks…(even if) it’s only $10 each paycheck, save it,” said Jasmine Smith, an accountant.
4. Live Within Your Means
Resist the urge to splurge. Don’t fall into the trap of impulse spending — track your spending and make budgeting your friend. Doing so can help keep costs under control.
“I grew up in a household of six, so my mom was a wizard of stretching every dollar,” Reid said. “She taught me how to shop for the best deals on the clearance rack, and how being frugal in a few areas of life allows you to experience other things we otherwise may not have been able to afford.”
5. Get Your Side Hustle on
Unlike millennials and Gen X, Gen Z is not tied down by traditional “college” rules. According to a recent survey by the Workforce Institute, 32% of Gen Zers believe they’re the hardest-working generation, but they’re also more driven by work-life balance than other generations. The study also said that half of Gen Zers favor the independence of side gigs. Many are focused on earning extra income through freelance work, part-time jobs and allowance from their parents to gain money and flexibility.
6. Be Smart About Debt
You don’t have to look too far to see the mistakes that previous generations made with debt. Learn from millennials and avoid the traps of loans. Educate yourself about interest rates, loan term agreements and get into a good habit of paying bills on time.
“The biggest advice I have for college students is to always look for scholarship money,” Smith said. “Even when you are in school you can still receive scholarship money. Another important thing to know that the refund money is not FREE money. So don’t fall into the trap of using that money to buy the newest cars, clothes, etc. That money is just the leftover of the loan you took out and will be paying back at the end of it.”
7. Give Yourself Some Credit
As teenagers gain more independence, it is a great time to teach them about credit.
“I encourage parents to teach their teens the difference between a debit and credit card,” Reid said. “I encourage parents to allow their teens to practice using a debit card for purchases and to help their teens build a monthly budget for their extracurricular activities.”
Your early 20s are the perfect time to develop good credit habits. Just like having a good grade in school, a good credit score helps you graduate to new levels.
“Revisit and explain how credit works and the short- and long-term consequences when credit is used irresponsibly,” Reid said. “Communicate expectations on how and when credit should be used (e.g., for emergencies, up to a specific amount) and when it should not be used (e.g. for Starbucks, nonessentials).”
8. Don’t Be Afraid of Investing
This generation’s love of tech and alternative solutions make robo-advisors — automated, low-cost investment management services — a perfect fit. They are masters of trading and investing apps like Robinhood and are not afraid of taking risks when new investment opportunities, such as cryptocurrency, come on the scene.
If you are a parent of a younger Gen Zer, here are a few ways to introduce investing to your children.
“You can open up a 529 savings plan or a UGMA account (that) you can use for educational purposes,” Smith said. “If you have a teenager who has a job you can open them up a Roth IRA account and invest in that. The simplest one is creating a savings account for them and contributing to it monthly.”
9. Build Your Emergency Fund
If 2020 has taught us anything, it’s that the only thing certain is uncertainty. Having money set aside for unexpected change is crucial. Start off small and be disciplined about not touching it. Remember: You should only dip into this fund for a real emergency (i.e., medical expenses, to help pay bills between jobs or a car repair). A vacation, shopping trip or the latest fashion is not an emergency.
10. Don’t Think That a 401(k) Is Just for Older People
You may just be starting out on an after-school job or on the first stop of your career. However, that doesn’t mean that retirement should be out of sight. If your company has a 401(k) plan, opt in. Put in what you feel comfortable with and watch your money grow. Years later, your 40-year-old self will thank you for being fiscally wise in your 20s.
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Last updated: Sept. 15, 2021