I started teaching my two eldest kids about money as soon as they got into their teenage years. Part of the reason was that I’d become tired of being treated like an ATM- with my kids asking me for cash and then spending it all on something frivolous.
Mostly though, I was determined to impart good money management skills in my kids. I figured that now that they’re in their teens and on the cusp of heading out on their own to (hopefully) become responsible, financially-stable adults someday, they needed to learn how to make, budget and save their own money. After all, I was giving them more independence in other areas of their lives so why not also teach them some money basics.
I won’t lie and say that things have been rosy over the years. In fact, there are times I seriously doubted the wisdom of giving my teens their own cash—like the time my daughter spent all her allowance on neon lipstick. But on the whole, we’ve all learned along the way and I can now say my teens are well on their way towards becoming fiscally responsible adults.
Here’s how I got down to raising financially savvy teens:
Earn before you spend.
As I said earlier, my kids were used to asking me for cash then spending it rather quickly. I finally got fed up one day and we had a discussion about money. I told them that if they wanted cash, they had to start earning it. They rose to the challenge and found creative ways of raking in their own cash including starting a neighborhood dog-walking service and helping to set up websites for some of our neighbors. Seeing how much effort it took to earn money helped nip their spendthrift habits in the bud.
An allowance comes with dos and don’ts.
Other than the money they earned doing various odd jobs (their chores didn’t count), my teens also received an allowance. I felt that this would be a great way to teach them finance basics. To drive the point home, I had my teens divide their allowance into 3 jars for spending, saving and charity. If they blew away all their cash, there was no bailout. They waited until the next allowance cycle to receive more. Furthermore, they were now responsible for some of their expenses like snacks or movie tickets and they quickly learned to trim these down.
Save and watch your money grow.
To teach my teens to save towards a goal, I asked them to list what they wanted for Christmas, New Year’s or their birthdays. Then they had to figure out how much of their allowance they needed to save to each attain their individual goals. My wife and I made it more interesting by offering to pay a certain percentage of interest based on the total amount they managed to save. My teens quickly caught on and soon they were more interested in saving than spending.
Prioritize your spending.
Writing down a budget is one of the best ways to plan your spending. However, crafting a budget and adhering to it are two totally different things. While my teens were pretty good at saving, they weren’t as good at controlling the amount left over for spending. So I had them write down exactly how much they spent on snacks, fast food, Starbucks drinks, eating out with friends, etc, for a week. The grand total of their mundane day-to-day expenses surprised them so much that they started thinking twice before satisfying their need for instant gratification.
Smart shopping pays.
Once my teens wrote up their wish lists, I challenged them to see who would find the best deals and bargains for their items. I wasn’t prepared for my kids to become professional bargain hunters. Turning to their favorite tool -the internet- they signed up for newsletters from most popular malls in our area and were soon receiving coupons, exclusive discounts, sale notifications and special deals that helped them get more bang for their buck. Even more surprising, to me at least, my kids who previously wouldn’t go near a discount rack were now happily finding all kinds of shop sales and taking advantage of them.
One thing I learned is to avoid micromanaging my teen’s spending. Once they earned their money or received their allowance, I gave them the opportunity to make autonomous decisions on how to spend it. I made sure they understood the importance of budgeting, saving and responsible spending then left them to decide what to do with their cash.
Yes, they definitely make mistakes. But I’d rather they make these mistakes now when the amount of money involved and the financial stakes are low. I don’t want them to become tight-fisted adults or worse, grown-ups who survive precariously from paycheck to paycheck. I want them to have a healthy positive relationship with money. I let them make mistakes now so that they can learn from them and hopefully those lessons will last a lifetime