Helping Your Teen Make Sense of Dollars and Cents
Q: My 14-year-old daughter seems to have no sense of money. She spends what she gets immediately and is always asking for more. The idea of working for extra money seems like abuse to her, and she frequently brings my parents and her friends into the issue. How can I rein her in and help her learn money management before she is off on her own? I do not want to support her the rest of her life!
A: Now is the perfect time to be thinking about this. You are watching behavior that you know could lead to problems in the future. It seems you want to make sure to do your best these next few years to prepare your daughter to have personal financial success. Let your family members know that you need their help in teaching your daughter budgeting skills. They can support you best by not giving her money when she asks for it without clearing it with you first. Get them on board as you start these conversations with your daughter.
Youth today are struggling with money management. Too much credit is available and most are taking on school loans at the same time. Income is not meeting expenses. In fact, research is showing that more kids drop out of college due to credit card debt than academic failure! More than 83 percent of students have at least one credit card with an average balance of $2,300. They also receive credit card solicitations each week. Research also shows that 78 percent of all high school students do not budget the money they have.
Many parents start with just letting young children have a certain amount of money each week to teach them the basic idea of needs, wants and desires. Having the ability to prioritize will help develop the antidote to impulse buying. As a parent you probably have certain methods to keep your own spending within what you can afford. Do you talk about this as you use the rules that guide your spending? Some parents use a walk away rule. If the desired item was not on the list to be purchased, then it isn’t bought immediately, but thought about before being purchased. Share your “rules” indirectly as you shop with your daughter, if you haven’t already.
Another money management tool is showing your daughter how you budget. It might work well to have her imagine what it takes for your family to live, and then for you to fill in the blanks. Using the budget planning sheets at www.betterbudgeting.com/budgetformsfree-basicbudgeting.htm will help you both visualize your categories and plan ahead for special events.
After you have shown her your budget, ask her to create her own. It is always best to start from the beginning (what things cost) rather than with the conflict over wanting more money. The budget shows there are two sides to all budgets, income and expenses. What are her income sources? The next step could be to suggest that your daughter carry a notebook and write down each thing she buys. Weekly, add it up and watch what happens the next week. When you pull the four weeks together at the end of the month, track the expenditures in categories; food, clothes, entertainment, etc. Then see if they shifted with just the self awareness of the spending. Is she pleased? Would she like to try something different in the next week? Did she end up saving any money for a big event such as a concert?
Would you be willing to let your daughter sit down with you as you pay your monthly bills? This is another way to make sure she understands spending limits and a checkbook. She can learn about interest payments on loans and managing monthly versus quarterly and semi-annual expenses. Make sure she sees the unexpected things that you must also plan for (plumbers, etc.) If your daughter shows an interest in this process for her future, TheMint.org has just the right teaching tool – “Living on a Budget.” This site explores salaries and allows your daughter to choose to buy a car, or take the bus. And if the budget does not balance, she can do it all over again. It is a great way to get her to think about the salary she wants to be able to make when she graduates in order to support her needs, wants, and desires.
Twice a year there are great opportunities for teaching budgeting. One is getting ready for school in the summer and the other is holiday gift giving. As with all budgets, you need two categories: income and expenses. Have your daughter list clothes and supplies she needs as well as gifts she wants to purchase. Your responsibility is to set the limit of income available in both categories. As she gets older and your trust increases, you might want to give her a bank card (VISA) with a fixed amount on it and have her present the receipts as part of the exercise.
By her senior year, you might want to prepare your daughter for college or living independently, by giving her greater financial control. Many employers pay on a two- week basis. Together, you two could arrange a budget for those items your daughter is responsible to pay, as well as what tasks as part of the family she will do to earn her “salary.” You could help her set up a bank account where a pre-agreed amount is placed every two weeks (1st and 15th). Out of this account she must manage her lunches, gas, entertainment, school supplies, and other predictable expenses. Be very clear in your budget how you expect the money to be earned and used, and the consequences for violations of this agreement. Be flexible for special events, and allow for ways that additional income can be earned for special expenses.
Hopefully, you can ease your daughter into taking charge of her money and her life and prepare her for success no matter how much or how little money she has. Successfully living on next to nothing is a step toward appreciating everything. You are helping her take those steps on her own. Good luck!
- Your Money or Your Life: 9 Steps to Transforming Your Relationship with Money and Achieving Financial Independence: Revised and Updated for the 21st Century by Robin, Dominguez and Tilford
- Get a Financial Life: Personal Finance in Your Twenties and Thirties by Beth Kobliner
- Raising Money Smart Kids: What They Need to Know about Money and How to Tell Them by Janet Bodnar
- The Motley Fool Investment Guide for Teens: 8 Steps to Having More Money Than Your Parents Ever Dreamed Of by David and Tom Gardner