Learning money management skills will help teenagers be financially successful when they grow up.
But many parents find this a big hurdle to jump over. They might feel uncomfortable exposing the family budget, find it hard to get their teens to care, or be unsure of their own money skills. Here are 3 tips for teaching teenagers the money management skills they need for the future: 1. Talk with Your Teenagers About How Financial News Affects the Family You might not feel comfortable talking about your income and expenses with your children, especially in bad times. Instead of focusing on your own situation, start the conversation by talking about the news. For example, look at how the COVID-19 pandemic is hurting the economy and causing financial problems for many Canadians. Then explain how your family is dealing with this event, which might include strategies like using an emergency budget. You could even ask your teenagers what they would do if they were leading the household through this challenge. Stepping into your shoes will give them the chance to understand your financial decisions and help prepare them for when they’ll be in charge of their own money decisions. 2. Help Your Teenagers Find Meaning in Their Financial Future, Starting with the Present Let’s face it: a lot of teenagers just don’t care about their financial futures. It’s normal for them to obsess over the present, and that’s why speaking the language of the now gets them interested. When teens see an immediate personal benefit, lessons make more sense. For example, if you’re trying to teach the value of money, then weave it into how you give an allowance. If you want them to learn good saving habits, then help them with managing their next pay cheque. A teen will likely feel that money they earn is all theirs to spend, and they won’t be happy if an allowance they always got suddenly starts coming with strings attached. That’s why sooner or later, your teenager will ask: “What do I get out of this?” If you want to keep them on board with what you’re trying to teach, then your answer needs to make them feel rewarded. How you reward them will depend on your preferred parenting style and the value you attach to money. For example, you could lower their do-nothing allowance to 50% but raise it to 150% if they work for it. You could match their savings contributions from their pay cheques or help them set short-term goals for buying expensive things they want. Even just telling them they’re doing great once in a while will help make them want to use the money management for children that they’re learning. 3. Future Success is Built on Past Mistakes – Let Your Teenagers Learn from Theirs Let your teenagers taste small money management failures now so that they can achieve big financial success in the future. Not convinced? Just think back to how you learned to ride a bike. Did you do it by having someone hold onto the seat the whole time, or by falling off until you learned the right balance? Letting your teenagers fail doesn’t mean stranding them on the highway. If you can support them without needing their money, then they can lose it without starving. And as teenagers, their own money probably isn’t much. Failing to balance a $500 budget now is a good deal if it teaches them how to successfully balance a $50,000 budget when they become independent. The sooner they learn from failure, the earlier they’ll start building success. Another reason to let your teens make mistakes is so that they can take ownership of their successes. If you hold their hand the whole time and are too involved, they’ll give you all the credit for everything – good and bad. A hands-off approach will help them gain confidence in their own ability to manage money and develop financial responsibility. You could of course still give some saving and credit-building tips, show them useful resources like a budget calculator, and be there to help whenever they need it. Help Your Teenagers Learn Money Management Skills by Helping Yourself An important part of teaching money management skills is using them. After all, our children learn a lot from not only what we tell them, but what we do ourselves. If you’re facing a financial challenge, set a good example by seeking the free help and support available to you.
2 Comments
When Kim Bruno was raising her sons, she sought to teach them what she calls financial integrity. She wanted her sons to respect their money and to give it clear intentions and purpose.
Her sons, now ages 29 and 21, paid attention. “I’m impressed with their financial literacy and I know that the foundation was laid down by their father and me,” she says. They are both on the right path for financial security in their lives. In fact, her elder son was recently preapproved for a loan and is looking to purchase his first property. As a mother and a U.S. Bank client services consultant, Bruno has some advice for other parents on how to teach their kids about money from the toddler years up until adulthood. TODDLERS Start talking to your child about money early. Young children will inevitably see a toy in a store and ask a parent for it. That’s the time for your family’s very first lesson about teaching kids about money, saving, and spending. “The moment they understand that ‘Mommy and Daddy have the ability to get me something,’ that’s when you introduce it to them,” says Bruno. “The sooner, the better.” The earliest money lesson might simply be hearing the word “no.” You can explain that the toy that’s being asked for isn’t in today’s shopping budget—and then stay strong. It’s tempting to give in to whining or a checkout aisle temper tantrum, but be firm. It may take time, but your child will eventually learn that you will not buy them everything they want. This lesson is crucial to impart at a young age, because the items you will be asked to buy will only become more expensive as your child grows. ELEMENTARY SCHOOL A piggy bank at home is good, but a savings account may be better. Young kids may benefit from putting cash or coins into a piggy bank at home. It illustrates the concept of savings literally, of course, and they can use the money to work on their addition and subtraction skills. Bruno also recommends opening a minor savings account for your child to establish a ritual of looking at the balance. (A parent will be on the account as well.) You could make this ritual of looking at the savings account balance one you do online together, or make a standing date for a visit to an ATM or bank. If and when your child receives a cell phone, you can even download an app for their bank so they can check the savings account balance there. Give allowances for going above and beyond. An allowance can teach children about earning money. But think carefully about what you are giving an allowance for, warns Bruno. Her philosophy towards allowances was to reward her sons for positive behaviors at schools. That has a parallel with the workforce, where going above and beyond and exceeding expectations will (hopefully) lead to bonuses or higher compensation. She was less enthusiastic about giving an allowance to her sons for doing chores around the house. “If your child doesn’t care about earning the $5, does that mean they don’t clean their room?” asks Bruno. She preferred that her sons learn that doing chores around the house was not optional. Encourage your child to save towards a goal. Savings goals are easier when they have a purpose, advises Bruno. While saving for the sake of saving is a good idea, it helps to have a reward in the future to motivate your child. (This is true for adults as well as children!) Let your child create an age-appropriate goal, such as buying a video game. Guide them through the process of saving money towards that goal—and celebrate with them when they meet it. It’s important for children to learn that prudent decisions with money, like saving, can lead to happiness. Responsible teenagers can get a credit card. Cosigning on a credit card for your responsible (a key word here) teenager satisfies two important goals for parents. One, it helps your teen establish credit, which will become important as they get older and seek loans for education or housing. Two, it will give them first-hand experience with learning how credit cards should – and should not – be used. For example, Bruno made her son an authorized minor on a credit card in her name when he turned 16. He immediately spent $400 on sneakers, jeans and a shirt – which was more than he could afford at the time. This led to a tough conversation between Bruno and her son about the consequences of using credit to buy things without having the means to repay it, and they created a plan together to ensure he wouldn’t overspend again in the future. This situation proved to be “a learning experience for him,” says Bruno. She says that children should understand that “credit is not for you to go buy stuff you can’t afford.” Bruno’s experience also underscores some of the risks of giving your teenager access to a credit card, and some of the questions parents should consider before doing so. It’s not the right decision for every family, but if it works for yours, it can be a helpful step in your child’s financial life. Parents should be patient while kids make mistakes. Some parents may be surprised at the suggestion of giving teenagers access to credit products. There are plenty of considerations parents need to keep in mind about the risks of sharing responsibility of a credit product with their teenagers, so it’s not a decision to be made lightly. If you’re not going to be okay – either financially or relationally – if your teen overspends or doesn’t keep up with making their payments, then it’s probably not the right approach for your family. But if you’re comfortable with doing so, it can be a valuable way for teens to learn about managing credit responsibly under the guidance of their parents. “You want them to work out the bugs, as I like to call them, while they’re still up under your control,” says Bruno. It’s crucial that parents accept their children will make some bad decisions with money. It doesn’t mean you failed to teach them correctly. “They need to make mistakes along the way,” she says. “You can help steer and guide them when they make mistakes—and note I say when, not if.” Like anything else in life, making financial mistakes—like Bruno’s son—is a learning opportunity. For many of us, a consequence that comes from not watching our money carefully is a lesson we remember. BEFORE LEAVING HOME Get your child a checking account and debit card. Before your child moves out of the house, they should understand how to use a checking account and a debit card, says Bruno. Establish a joint account so that you can monitor their behavior, and be prepared to teach them about the fees associated with overdrafts to a checking account. Just as you have taught them to regularly check his savings account, teach them to regularly check their checking account as well. Introduce the idea of an inheritance and a legacy. An essential component of learning about financial integrity is teaching children about a legacy, Bruno says. One way to explain this to your kids is to talk about the difference between inheritances and legacies. An inheritance is “what you’re leaving for your children,” says Bruno. That can come in the form of financial gains, of course, but it also includes the lessons that you impart to them about managing their money wisely. A legacy is what they take with them in their lives, or “the outcome of their own behaviors,” Bruno explains. They will start their financial legacy with their very first savings account, credit card, and checking account. Developing a legacy encourages them to think about their life in the longer term, and underscores how it is up to them to make decisions about what the outcome will be. In Margaret Johnson’s view, kids are woefully uneducated about money. “I once asked a group of school-aged children where money came from. One little girl said, ‘From the machine,’ and when I asked what happened when the machine ran out, she replied, ‘You just go to another machine.’”
Her advice to counter this attitude? “In order to teach money management to children, kids need to have some of their own. An allowance is a great way to do this,” says Johnson, who in addition to being president and CEO of Solutions Credit Counselling in Surrey, BC, volunteers her time teaching elementary school students about money. Johnson says six- to eight-year-olds are ready for a little money of their own, even though some will head straight to the candy store. But parents shouldn’t place restrictions on what happens to it. “Better to learn from their mistakes at this age than when they’re older,” says Johnson. And there are ways to teach saving as well as spending. Here’s how: Make it real: Johnson recommends giving the allowance in coins. “Kids love to look at them and touch them, and they can put them into their banks.” Show her that five pennies equal a nickel, two nickels equal a dime, and so on. “They start to see how it works,” says Johnson. Decide on the amount: Chelsea Reynolds gives her daughters, Bryn, eight, and Tegan, six, $2 a week. Other parents use a rule of thumb like 50 cents for every year of age. Johnson suggests parents consider what they can afford and what they expect their children to use the money for. Be sure to give the allowance consistently, perhaps every Saturday morning. Encourage goals: “Learning to manage money starts with goals,” says Johnson. “Ask your child, ‘If you had a lot of money, what would you do with it?’ If there’s something he wants to buy, price it out together and figure out how long it will take him to save for it. This gets kids thinking a little more long-term,” says Johnson. Share family values: Talk with kids about how you spend, save or donate the family income, and why: “Mom and Dad put aside money every week for our vacation. Would you like to save some of your allowance so that you have some extra spending money?” Get to know the bank: “Making a deposit is one of my girls’ favorite things to do,” says Reynolds. “We go to the teller and they love to get the little slip.” “The child sees savings grow over time and understands that banks have a responsibility to care for people’s money,” says Johnson. Most banks offer no-fee children’s savings accounts. Don’t tie allowances to chores: “The purpose of an allowance is to teach kids about money, not pay them for work,” says Johnson. “My girls are expected to make their beds and put their dishes in the dishwasher,” says Reynolds, “and, in fact, they brought up the idea of an allowance by asking what they could do to get one. But we’ve never withheld it or threatened to take it away if they didn’t do their chores.” Be careful about credit “If you give children money when they’ve burned through their allowance, the lesson is: If I run short, I can always get more,” says Johnson. And, if you allow them to borrow from you, you’re actually encouraging debt. Reynolds, however, thinks a short-term loan is OK once in a while: “We were at the farmers’ market and Tegan wanted to buy a bouquet of flowers. She had $3.63 with her; the flowers were $6. I lent her the money and she paid me back out of her piggy bank as soon as we got home.” Reynolds thinks that experience actually helped Tegan understand how money works. “There was an immediate connection,” says Reynolds, between how much money she had and how much the flowers cost her. Allowances: Good or bad? I asked 18 parents for their opinions on three types of money dispensation for kids: Allowances pegged to performing household tasks; Set-amount allowances distributed unconditionally; No allowance at all.
Emotions run surprisingly high on this topic, which makes me believe there is no absolute right or wrong. In the end, it’s more about how parents handle and how to teach kids about money? For what it’s worth, here’s the non-scientific results on each method. QUID PRO QUO The majority of parents I surveyed like allowances pegged to chores based on a simple belief that if children have to earn money, they’ll likely be choosier about their purchases. My neighbor’s 7th grade daughter lost her iPod touch on the heels of buying $50 PJ bottoms at an upscale store for pajama day at school. Not only did she dislike the PJs two weeks later, she wished she still had the $50 to start saving for a new electronic device. Now she needs to start over, chore by chore, to replenish her funds. Parents need to be fair, though, about the price of chores. If you’d pay a stranger $20 to shovel the driveway, your child shouldn’t get $10. ON THE DOLE A set allowance not pegged to chores supposes that kids need a certain amount of money as they get older, and will manage discretionary spending and saving with what is doled out. Chores are unpaid because all family members must pitch in. This is great in theory, but often harder to control without nagging. I find that my friends who are constantly on the go with busy schedules find this approach the most convenient. However, I got a lot of hemming and hawing when I asked them if they have financial discussions that accompany the allowance. Tom Walter, a financial planner and creator of a money course for Naperville 8th graders, has a different perspective. “What are we teaching our kids if they get an allowance for no work? We are saying, ‘Mom and Dad will always support you,’ and that isn’t how the world works. It causes a dependency that later in life can cripple adults from being on their own and successful.” LET’S MAKE A DEAL Offering no allowance has its advantages and disadvantages. On the plus side, it gives parents the opportunity to discuss what expenses will be absorbed by Mom and Dad, “discuss” being the operative word. When our freshman son begged for $100 sandals when $50 sandals would do, we discussed splitting the cost 50-50. After protestations, he “found” Christmas money to finance the purchase. He took excellent care of those sandals. That same year, he got a job as a golf caddy to avoid dealing with us every time he wanted to spend money. Unfortunately, he also felt no need to save since he was the master of his own financial destiny. WHICH SYSTEM WORKS BEST? Lewis Mandell, the former dean of business at SUNY, has studied decades of allowance research. “The prevailing wisdom is that allowances are a wonderful way to train kids to be financially literate.” Kids who did the worst on financial literacy tests were the ones who received an unconditional allowance. Interestingly, the next highest were kids who did chores for money, with the highest financial literacy scores coming from those who didn’t have an allowance. Mandell explains that rather than using allowances as instruments for teachable moments, some parents employ them as a way of avoiding the money subject altogether. According to most money experts, the bottom line is that if you do allowance poorly, you’re setting your kids up to be worst off than if you didn’t offer allowances at all. I have 11 year-old and 6 year-old kid. I should be great at teaching kids about money? After all, I’ve invested untold thousands of dollars getting an MBA in Finance from a top 10 business school, plus that B.A. with Honors in Economics. Sadly, neither of these hold much weight with people who can still order off the Kids Menu.
The reason my advice isn’t useful turns out to be simple: the idea of money is something that must be experienced. Adding and subtracting is easy enough, but making effective decisions requires perspective about what works and what doesn’t. The most important thing I’ve learned from my coursework at firm is that becoming great with making decisions about money requires having the freedom to gain intuition. That can only come from experience. So it’s about my kids learning, not about me teaching. What has shifted for me in my experience is that I now see it as my job to look for opportunities to let my kids push forward the boundary of independence of decision making and seek to give them freedom (within a defined playground) in which to make their own mistakes. It’s a powerful shift in approach. And it is fun. Now I get to be the one looking out for new areas for them to explore, instead of the one trying to manage life down to a reasonable limit. We all want to raise kids who are happy, well adjusted, and, let’s face it – financially successful. But if you haven’t got your own financial life sorted out just yet, how do you make sure to teach kids smart money habits?
T. Rowe Price, the popular investment firm, surveyed over 1,000 parents and adults and found parents have a massive effect on whether their kids have good or bad financial habits. Here is a simple five-step plan to help providing financial education for kids: Give an Allowance The best way to teach kids about money is to give them small amounts to control. Research has found, children who manage their own money have better money habits than those who don’t. You can give your kids a set amount each week. Or you can pay them for doing chores or tasks around the house. You can also start small and start young when teaching your kids about money. Some people give an allowance to kids as young as three years old. You’ll need to make sure you have some dollar bills on hand and set a day and time you’ll pay out the allowance. Or use a digital money app to make it easy. Decide on the amount you’ll give. When your children are younger, you can start with $3 a week. As they get older, you may want to double it to $6, and perhaps top out at $10 per week when they’re preteens. Teach Kids How to Save To teach kids not all money is for spending, you can use the jars method popularized by radio personality Dave Ramsey. Create three jars for each child: a saving jar, a giving jar, and a spending jar. The jars don’t need to be fancy – Mason jars or old yogurt quart containers will do. Use a permanent marker to label each jar. When you give your kids their weekly allowance, have them put $1 in the saving jar, $1 in the giving jar, and the rest in the spending jar. The act of dividing up their money each week is an excellent way for kids to see and experience putting their money into different places. You’ll be teaching them it’s always essential to have some money saved for emergencies and to give some money to people or organizations needing help. Eventually, when your child has built up some savings, you can help him open a savings account paying interest. You can even pick a savings goal, like buying a car when he turns 16. Or saving up for a trip or unique experience when she graduates high school. From time to time, you can open up her online account and show her how much money she’s saved. Let Them Spend After a few weeks, your kids may start talking about the spending jar. They’re ready to buy something. This is a great time to teach kids about delayed gratification. The toy in question will probably cost more than they have saved. This is the time to explain they have to wait a few more weeks until they’ve saved enough to buy the toy. And that no – they can’t dip into their saving or giving jars to make up the difference. You can also allow them to do chores around the house to earn additional money. This a great way to teach kids about making money when they want extra. They can get it by working for it. It will be hard for them to wait, and they’ll probably whine and complain a little. This is your chance to stand firm and let them know they have to wait and learn patience in the process. Show Them Giving Is Important When we teach our children to give, we’re helping them become more compassionate and grateful. The giving jar is a way to model kindness for our kids. As their giving jar fills, your kids can research charities they’d like to donate to. It can be a local family in need, your church, a food bank, or a school initiative – like saving money for kids with cancer. If there is a family with a new baby in your neighborhood, your child could donate part of his giving allowance to purchase the food needed to prepare a meal for the family. And as a bonus, you could make and deliver that meal together. Talking about their gifts to others is a very powerful teaching tool. “Look how thankful our neighbors were to get a meal from us. You helped make them so happy!” “It was so kind of you to donate your giving dollars to the food pantry. Lots of families who have trouble buying groceries can go and pick out food now.” It’s also important not to diminish your child’s contribution just because it’s small. She should see that every dollar counts and that she can make a difference. Teach Kids Money Habits Consistently The best way to teach kids about money is to stay the course. If you forget to give them an allowance for a few weeks, challenge yourself to get to the bank for some dollar bills. Then start again. Or check out a tool such as Greenlight or FamZoo, an award-winning app acting as a private family banking system. It’s designed to help parentsteach kids to earn, save, spend, and donate money wisely in a safe, friendly environment. Parents define the virtual family bank rules to match their family’s unique values. And this tool helps busy parents teach their children about money in the most realistic setting possible – daily family life! Letting your kids be in charge of some of their spending, month in and month out is a great way for them to develop confidence in their ability to manage their own money. You can do it, Mom (or Dad)! Raising financially responsible children involves teaching them a variety of aspects, from budgeting to planning, earning and saving. Parents may feel unqualified when it comes to teaching kids about money, but experts say no degree in finance or special knowledge is necessary. In reality, the process of teaching your children about money can be fun and interactive.
One of the common questions is when it is better to start teaching children financial literacy? The answer is - it's never too early to start this process, and a variety of global researches prove it. According to a 2013 Cambridge University study, children are already able to grasp basic money concepts at age three, and by age seven, their money habits are already set. So don't wait until they are 18 and ready to go off to college when you can teach fun and simple financial lessons to your kid right now. Play "Let's Go Shopping" Every kid loves playing games, so why not turn this fun activity into a learning process as well? All you need is a bit of imagination to create a supermarket in one of your rooms, a toy cash register and a food play set. The register with a numerical keypad, cash drawer and pretend money creates a close-to-reality shopping experience for kids. The next step is to price the items and let kids play. As a parent, you put your children on a budget and give tasks that they should accomplish while shopping. Stimulating the shopping experience will help to sharpen their math and budgeting skills. It can also be helpful to make them more comfortable talking to others about money. Play "How Much Does It Cost?" Another game suggestion to play with your kid is to recreate a home version of The Price Is Right. The game is very simple and doesn't require any special equipment. At the dinner table, parents take turns presenting arbitrarily selected items for sale, along with multiple choice answers for their approximate prices. A few examples:
Avoid Giving Kids Money Freely One of the common mistakes that parents make is offering unlimited funds to their children for non-essentials. There are no rules about how much money you should give your children, but a fixed weekly allowance is highly recommended. If they want more, give them a chance to earn extra cash by offering help or performing well at some school tests, for example. This practice will bring them a sense of financial responsibility as well as money value. Children of parents who offer them unlimited funds may develop the habit of relying on additional funding sources that can be quite costly, such as debt in the form of high-interest credit cards. Budget Together Budgeting might be a totally unfamiliar process for your children, but it is one of the most important ones when it comes to money management. The easiest way to teach your kids about budgeting is to involve them in this process. For example, when your kid gets invited to a birthday party, give them a reasonable budget and shop together for a gift that stays within their price lane. A great way to do so is shopping on Amazon as you can teach them how to comparison shop as well. Show Kids How to Put Their Money to Work The savings process makes complete sense for adults, while for children it might be a very abstract thing. It is essential to explain to them in basic terms how their money is earning more money (passive income) and how that additional money will continue to generate even more money (compounding). But what's more important, show them how this process works by relocating your kid's savings from a piggy bank to a local bank or credit union! When and how to teach kids about money, saving, and spending? According to the Council for Economic Education, only a third of US states require high school students to take personal finance classes to graduate.
One in five 15-year olds in the US lacked basic financial literacy in 2017. Since financial education is not commonly offered in the American school system, the responsibility of teaching kids about money falls on the parents. And this is not an easy task. How can parents prepare kids for making good financial decision? Lets take a look at 3 help tips we can keep in mind. 1. Make the distinction between wants and needs Necessary expenses are food, clothing, and shelter. These are needs. But these needs can become blown out of proportion fast. While basic clothing is essential, designer jeans and handbags are not. These are wants. Multiple toys and games are also wants since they don’t contribute to survival. If you give your child a weekly allowance, stress the importance of making smart purchases by setting rules; such as if they spend all their money on a game or expensive clothes, you will not be giving them any more money that week. 2. Instill Patience An essential financial lesson every child should learn is how to wait to make purchases. By having patience, kids learn how to be self-discipline and save money needed for retirement, college, and other importance expenses in adulthood. Kids also learn to avoid impulse shopping and wait for optimal times to make purchase such as sales. Stress the importance of waiting asking your kids, “Is this something you need now, or can you wait?”. 3. Teach Kids to Save for Rainy Days Teach kids the value of money by opening a savings account for them. By opening a bank account, kids become familiar with banking terminology such as deposit, savings, balance, withdrawal, interest, etc. They can learn how to manage their own money and see their pocket money grow while allocating money towards different goals. Seeing an increasing savings balance may give kids positive feelings and give incentive to save more. Emphasize on the importance of saving up money each week or month. In an ideal financial situation, more money should be coming in and less money going out. Smart money management is not something that can be learned overnight. During your child’s developing years, make it a point to educate them about saving, budgeting, and planning. Since kids are always watching and learning, you can also lead by example. Everything in life can be overwhelming when you are a teenager. Parents of teens deal with the symptoms of this daily. While some parts of your young adult's life can be difficult to guide them through, you can do a lot to help in teaching teens about money.
With a little guidance, teens can learn financial responsibility and begin to see the results of smart money management. Banking Opening a checking and savings account may be second nature to adults, but for teenagers, it can be a great first step towards financial responsibility. Seeing how money flows in and out of a checking account through spending and deposits is a big part of learning basic budgeting. Budgeting Developing a budget, and sticking to it, are skills that all of us should practice no matter what age we are. But when we learn things like budgeting early on, we tend to utilize those skills as we get older. Technology for building budgets and tracking your spending is available in all sorts of forms these days, from apps like Toshl Finance to running a micro business with QuickBooks. Budgeting will help teenagers build towards long term spending goals. Regular, planned contributions to a savings account can help your teen meet short and longer-term spending goals. Every teenager wants stuff, whether it is the latest iPhone, a new PlayStation or a mountain bike. Developing their savings will help them understand the patience and discipline needed to reach these goals. Spending Strategies Teens can develop good spending habits and financial responsibility by learning strategies to help them preserve their money. Learning not to borrow money by living within their means may be hard for them, but it will pay off in years to come. One tip for teens is to encourage teens to leave debit cards at home and take no more than what they want to spend when they go out. Encouraging them to track where their money goes (and review once in a while) is a great way for them to learn about their spending habits. Cards Dave Ramsey encourages parents to avoid giving teens credit cards. He says that it teaches people to live on borrowed money and that any advantages of building credit early are far outweighed by the temptations to spend with the card. While credit cards are initially not a great idea, getting your teen a debit card is encouraged by US News: "A debit card will allow teens to see whether they spend money more easily when it's virtual, and they can prepare to take extra care when using credit cards as they get older." Savings Incentives Getting your teen to stick to any routine might be difficult. Helping them to learn to contribute to their savings account by offering incentives can help. Advice for teens is to ask parents for help here and there. One way for relatives to help would be to match a teenager's savings goals. Ie., for every $100 they save, they get $100 matched in their savings account. Rewards can be a big incentive to learn good savings habits. But in truth, banks do the same for us by offering earned credit on savings accounts and other financial products like CDs. Emphasize the use of credit to build long term savings with your teen. Earning It's a big first step in life, but for many, our teenage years are the time when we get our first job. Teenagers are likely to want to spend as much as they can get in income, if not more. If they aren't making money on their own, that income is coming from parents or other relatives. A part-time job will add a lot of financial freedom to their lives. If they aren't ready for a job, consider household or neighborhood chores as an option for earning money. No matter what, the first payday will demonstrate how worth it an independent income can be for them. Unlike when I was growing up teenagers did not have a lot of buying power. However, as teens, its responsibility of our parents to provide financial education for kids, and we eventually learn from them only. We learned through what they allowed us to do and also by watching what they did. Teens and money must be a subject we are to address if we want to break the family consumer cycle.
1. Having no accountability Over the past 20 years of teaching personal finance, I have found the number one reason adults have issues with finances is that they never had accountability with money, therefore, they have had no restraints or structure with money. This is because as teens no one held them accountable for how they spend their money. They believe they earned it they can spend it however they like. This attitude continues as they grow older, retire on nothing, and eventually, die leaving nothing behind. Holding teens responsible for how they spend will result in more responsible adults who understand you work hard and save some for when you can’t work. 2. Spending too much on looks Teens spend one out of 3 of every 10 dollars on how they look. This is 30% of all they have. We are teaching lessons whether we understand it or not. We are allowing our children to look good and be broke. Trust me one this, the pattern will not be broken. They will grow up with closets, garages, and basements full of clothes, shoes and accessories they don’t wear while most of them still having tags on them. 3. Not understanding the value of the dollar The reason people can spend without concern for their future is that they did not learn the value of the dollar before they were trained in consumerism. If the value of the dollar is learned before teens are inundated with consumerism they will not fall for the deadly disease that kills futures, finances, marriages, and even spiritually. The value of the dollar is more powerful than anything you can purchase. The dollar’s power is never lost only transferred. We transfer our power every time we spend the dollar. We transfer it to those who teach consumerism and therefore benefit from being on the other side of it. 4. Developing a consumer mindset According to Business Insider, 23% of teen’s money is spent on food, then clothing, accessories, video games, cars, electronics, shoes, entertainment. Nowhere in this equation is savings listed. We are teaching our teens to be consumers. To consume, waste, squander, destroy money. We must do better. It’s not until we begin to teach teens that they are wealth builders and not consumers that we will see a difference in how they spend. They will grow old with the same spending habits. If you don’t believe me then look at how you and others spend their money and you should find a sticking resemblance. 5. Not equating work and money Finally, as we look at teens and money we must consider their work ethic. Work and money go together and when separated one or both will be abused. When money is given and not earned it money will have no value to the recipient although it still possesses value. It’s like giving diamonds to someone who doesn’t understand it’s value. They will carelessly disregard it is just glass or a shiny stone. When they understand it value it will be taken care of and protected. When work is not equated with money then it is abused. We are producing a generation who is not punctual, has no respect for authority, does not put forth their best effort, has no customer service skills and we wonder why. Their job is their income. However, when I don’t respect money then I will not respect how I obtain it. Lockdown has been hard on us all, but perhaps hardest on children, who have seen much less of their friends than they would have wanted.
But it’s not all bad news. In fact, recent data reveals many under 18s have managed to cash in during lockdown, with 17% more pocket money paid in during January 2021 compared to the previous year. This increase seems to have been mainly a result of parents offering their kids financial rewards for home-schooling and good behavior, as well as grandparents who haven’t seen the family in months being more generous when topping up grandchildren’s accounts online. As shops start to re-open, kids may understandably want to treat themselves by spending some of the funds they have built up during lockdown. But while it’s important for children to enjoy their savings, some may struggle to keep spending to sensible levels. Teaching teens about money and saving can be tricky, so here are some tips to get you started. Language matters Unfortunately, the term ‘pocket money’ is not entirely helpful, as it implies cash that’s easy to come by and easy to spend. In that light, kids might be forgiven for assuming pocket money should be spent on a quick fix – the latest computer game or treats from the sweet shop – rather than used to grow a savings pot. At the same time, telling kids to save money in their piggy banks is also increasingly at odds with today’s cashless world. While the very young may get a kick out of counting out their cash, older children are less likely to connect with this more old-fashioned way of saving. That’s where the term ‘allowance’ can help. Using this more adult-sounding phrase can help encourage children to re-think how they view money, guiding them away from impulse buys and towards more responsible purchases. Managing an allowance can help children redefine what they think of as ‘must-buy’ items, and teach them the value of restraint. Get hands on For a generation that is growing up in a contactless world, the concepts of saving and budgeting can be hard to grasp. One of the best ways to teach children about money is for them to see it in action, so consider seeking out opportunities for hands-on, real-life money management lessons with your kids using everyday scenarios. Perhaps you could sit down with your children and work out how they’re going to save for something they really want. Is waiting for the next allowance payment going to take too long? Do they need to cut back on their spending for a while? Or maybe they could they boost their savings by doing extra chores? Have they tried using a micro-saving function to put aside spare change every time they spend? Challenge time Many kids love a good challenge, and this can be a fun way of teaching them to think differently about what they do with their money. For example, over the next few weeks why not see whether your child is up to saving at least one third of their allowance, donating another third to a good cause and doing whatever they like (within reason!) with the rest? Alternatively, you might strike a deal to match a percentage of the total value they manage to save over a certain period. If all goes to plan, their self-restraint will be rewarded with a healthy pot of savings, with the added reward of knowing that patience pays off. Kids holding the purse strings With research showing that children’s money habits are formed by the tender age of seven, it’s essential that even primary school age children are involved in conversations about money, and given a chance to manage it too. So why not put the kids in charge once in a while, for instance by asking them to use their budgeting skills to make a certain amount of money last all week? This could be their own allowance or perhaps even the family’s weekly shop. By doing so, they’ll gain a better appreciation of the importance of budgeting and also develop a real sense of ownership over their finances. Ready for the future Good money management skills are vital life skills, and it’s important that children learn these early on to help them make better financial decisions as they get older. The knowledge and confidence to manage money wisely is a gift that money really cannot buy. Parents can prevent their children from getting into ‘reckless spending habits’ and prepare them for university and beyond by teaching kids about money, saving and handling money in their teens.
That’s according to online student bill sharing tool Split the Bills which has found while a fifth of parents prepared their teenagers to manage a budget, being responsible for personal bills still came a shock to many first-year university students. It is urging parents to follow its advice by teaching their children about saving using pocket money and piggy banks and helping them learn to budget by giving them financial responsibility and encouraging responsible spending habits. Pocket Money According to Split the Bills, pocket money is a good way to teach teenagers about personal finances as it enables them to take responsibility for their own purchases and also think about how they use money. Linking the money to chores or high grades can offer an opportunity to teach teens the value of hard work. There are also piggy banks which you can buy – or even make – which provide different compartments to help teens categorise their money according to saving, spending, gifting or investing. This can help teach young people how to plan ahead. Budgeting Giving young people opportunities to experience making decisions about money will help empower them to be able to handle their own budget. According to Simonne Gnessen, founder of Wise Monkey Financial Coaching and co-author of the book Sheconomics, parents should avoid talking about money using phrases such as ‘no we can’t have that’ or ‘we can’t afford it’. Instead, parents are urged to give them their own money and think through the decisions themselves. “For example,” said Gnessen, “if they demand popcorn and expensive drinks at the cinema, give them a budget for treats and a choice of either shopping at a supermarket and getting more for their money or using it at the cinema and getting less.” Split the Bills advises, when teenagers begin earning, parents should get them into the habit of budgeting by helping them write a list of their outgoing payments to identify what they have spare and where they need to make cutbacks. Responsible spending Getting your teen to think about every purchase by weighing up whether it’s something they genuinely need or simply an impulse buy is crucial, said Split the Bills. Young people will naturally be influenced by their parents’ behaviour – so set a good example. Ashley Tate, chief executive at Split the Bills said: “If they see you buying a new pair of shoes each month, they will accept that as the norm and be likely to follow in your footsteps. “If you show them that there’s something you want, but you aren’t going to buy it because it isn’t a necessity or a priority, you’ll encourage them to do the same.” Teenage money management isn’t always a fun topic to broach with your 13-going-on-30 year old who thinks they already know it all. But cultivating positive habits and good personal finance for teens is a quality they’ll use and appreciate their entire lives—and a skill you’ll be grateful for, too, once your young adult establishes their own financial independence.
Talking about money doesn’t need to be like pulling teeth. Here’s some advice for easy and painless money management training for young adults that your family should start working on today! Personal Finance for Teens Only four states (Virginia, Tennessee, Missouri, and Utah) require high school students to complete a stand-alone course in personal finances to graduate high school, but every teen should enter adulthood with basic financial literacy. Sadly, few teens understand basic financial terms (such as “interest rate”, “debit card”, and “financial institution”), or are saving for long term goals, like college or buying a home. And less than one-third of teens know how credit card interest works, according to a survey reported in Huffington Post. A 2009 study by the National Bureau of Economic Research (NBER) found that only 27% of young adults understood basic financial concepts like inflation and interest rate calculations. Basic personal finance for teens is critical in order to thrive independently as adults, and these money management skills should be taught when kids are young, so positive habits have time to develop before they leave the nest. Teenage Money Management Lessons Here are some of the most important personal finance basics for high school students. Financial Tips for Teens: Make Saving Second Nature Ideally, children should learn to set aside some of their money as savings from the time they start receiving an allowance in the elementary school years. Teens should be encouraged to save money consistently from all the cash or income, including money from part-time jobs, allowances, and special occasion money like that for birthdays and Bar Mitzvahs. Teens should learn to skim this money right off the top and put it into a savings account. This ingrains a saving habit early on, so make it one of your first lessons in finance for teens. Financial Tips for Teens: Learn the Value of Budgeting and Delayed Gratification High school students and delayed gratification may seem to go together like oil and water, yet young people are perfectly capable of learning basic budgeting. Creating a budget isn’t just for adults with mortgages and bills, but for anyone who wants to learn to manage and spend money better. Fortunately there are some terrific online tools, like our budget app and budget tracker, that make setting up and monitoring a budget flexible and simple. Your teen can carry around his or her bank balances and savings goals right on their phone, and can even set up automatic alerts for situations like a bank balance dropping below a certain threshold. Personal Finance Lessons for Teens: How Bank Accounts Work Teens may think of bank accounts as little more than remote piggy banks that occasionally chip in a little interest money. Teach them that a teenage savings account is the key to being able to afford bigger ticket items later and cope with financial emergencies like replacing a pair of basketball shoes left behind after an away game. A bank account can also be a route to a secured credit card once a large enough balance can be maintained. Personal Finance Lessons for Teens: How Credit Cards Work Even if a teen doesn’t obtain a credit card until after college, knowing how they work can help keep temptation in check once that day arrives. Teenage money management includes their awareness about how much credit cards charge in interest and how interest can make the true price of an item go up drastically. The basics of credit card rewards programs (and how they are only beneficial to those who don’t carry a balance) are other personal finance basics for teens that they should learn before they sign up for their first credit card. Personal Finance Lessons for Teens: The Importance of Credit Scores Teens are used to being graded. From report cards to SATs, teens are well aware of how numbers are used to represent accomplishments and responsibility. The concept of the credit score is not lost on the average teen, and though most can’t do much about their credit score during high school, they can lay the foundation for building one in adulthood with teenage money management. By learning the concepts listed above (saving habits, bank accounts, credit card interest) and putting them into practice, your child will be much better prepared when they begin building their own credit history. Without proper teenage money management, those with low financial literacy are more likely to have problems with debt, are less likely to invest, and are less likely to plan for retirement. High schoolers are hungry to understand personal finance basics for teens, with 84% of college students saying they needed more education on financial management. Sixty-four percent of college students say they would like to have received this information while still in high school, according to the NBER study. If you’re the parent of a teenager, your child probably isn’t receiving personal finance instruction for young adults at their school. Whether or not he or she is formally learning about teenage money management, it’s important that you emphasize the value of developing good personal finance habits at a young age and do your best to set a good example. Personal Finance for Teens: FAQ Okay Mom and Dad, if you have a few more questions about how you can pass on the importance of personal finance basics to your high school students at home, here is our best advice for our most commonly asked questions. How do you manage pocket money? If you’ve come across way too many $20 bills while doing your kid’s laundry, your frustration over poorly managed pocket money is probably pretty strong. To teach better teenage money management skills, make them earn their pocket money rather than forking it over every Friday night. If a weekly allowance doesn’t work for your family, consider making a price list for jobs around the house so they can create their own income. How can a teenager stop spending money? For starters, you can stop giving it to them – but that doesn’t foster finance skills for teens, it simply punishes them. Alternatively, try to encourage their saving habit with some juicy incentives. For example, you might consider matching a portion of their monthly contributions to their teenage savings account. Another great financial tip for teens is to suggest they carry cash rather than a debit card; seeing the cold, hard bills drain from their wallet will motivate them to hang onto them a little longer! Why is teenage money important? Not because your daughter wants a designer purse or your son needs the latest Nikes. It’s important to teach teens about money in order to pave the way for responsible spending in college, financial planning for the future, and family budgeting when it comes time to start thinking about your little grandchildren down the road. |
AuthorHi! I am Tim Connolly and I am providing help to parents to bring up their children in a healthy environment. I am working in this profession from last 5 years, if you have any query regarding this please contact me. Archives
June 2021
|