When we were creating our allowance structure, Barbi and I told the boys, “You are now responsible for paying for your own social lives as long as we aren’t present. If we go with you, we will pay.” So now when they are broke, they sometimes invite us to go to the movies with them and their friends — as long as we sit in a separate section.
Defining the Problem
Money can talk to you about your teen. How your kid handles his finances can tell you a great deal not only about how he will handle them as an adult but also about how he will manage his life in general.
When you think about your teen and money, think of the word future. No other problem in this book is so clearly future related. Teens are generally oriented existentially; they live in the now. They think, Tomorrow may never come, so live for today. But if this attitude persists, your teen is headed for problems.
Credit card companies are lining up at colleges right now, waiting for your teen to arrive. They lure students to sign up for credit cards with the promise of instant gratification and “free money.” Many college students don’t understand the reality that they are incurring credit card debts that are beyond them. Will yours?
Most of the problems parents encounter with their teens are similar to the problems of many adults. They overspend. They buy things impulsively rather than deliberately. And they often borrow from friends and family and can never pay them back.
Many times these teens have an indulgent, conflict-avoidant, or maybe uninformed parent who is the true source of their problem. Parents are typically the source of their kids’ money, and if the parents would stick to the limit, many of their teen’s overspending problems would take care of themselves.
As a parent you have a lot of influence over your teen’s attitude toward money. There are things you can do to educate your teen about money matters and to help him learn to save money and buy wisely.
Handling the Problem
Here are some thing you can do to help your teen become fiscally responsible.
Talk to your teen about money. Most teens don’t have a good understanding of what things cost, or about saving, or about value. That’s why the nation’s advertisers target the teen market so heavily these days: so much discretionary income, so little judgment.
Until you tell her differently, your teen will likely be extremely unrealistic about money, particularly if she can get some from you anytime she wants it. She may even think that you get your money “for free” from the ATM.
So educate your teen about money matters. Give her some realities. Make sure she knows where your income comes from (no need to talk specific numbers), what you spend it on, and how you have to say “no” to yourself sometimes so that you can meet goals for the future, such as her college and your retirement. Help her understand how credit cards work, and teach her that there is no such thing as “free money.”
Decide how the teen gets money. You want your adolescent to have an income so that you can help him become responsible for expenses. This may mean giving him an allowance, or having him find a job, or a combination of both. However you do this, have his income be more than fun money. It should be large enough, if possible, that he can pay for things that matter in real life, such as clothing, toiletries, social events and entertainment, just to name a few examples.
That said, establish a budget with him. Let him know that you will take on certain things for him and that he is responsible for certain things. If he blows the money on fun, he has less clothes or goes out less with his friends. Budgets are where your teen can truly experience the reality of fiscal responsibility, which can pay large dividends (literally) later in life.
Hold the line. Many parents don’t require that their teens stick to the budget. The extra money has to come from somewhere, so many parents give in and make exceptions because they feel guilty or sorry for their teen, or they don’t want to make their kid angry.
If this is you, I want you to think about the future you are helping create for your teen. Imagine her not being able to establish credit or get a home loan because of what she learned about money from you. Love is often saying “No” to “More, please.”
Sometime parents loan money to their teens against the next allowance. They think, Well, it’s her money anyway, so what is the harm? Plenty, I think. This sets up a dangerous credit mentality. So when your teen asks you for an advance, just say, “I gave you your allowance two weeks ago. You’ll have to do what I do when I overspend, which is live on less for a couple more weeks. You’ll make it, I’m sure.” Give your teen the experience of learning that you spend what you have, not what you will have.
Set up a savings account for your teen. Not only do you want your teen to buy wisely, you also want him to develop a habit of saving money. Take him to the bank and help him set up a savings account.
Make sure the allowance includes some extra money — beyond your teen’s expenses — that he can put into savings and then watch grow. You want him to develop the habit of putting a little away every time he gets some money, whether it’s his allowance or a gift.
Set up a provision for giving. Also include some money for giving with the allowance. Make giving normal and expected so that generosity becomes part of your teen’s life. When our kids were younger, Barbi and I deducted a certain percentage of their allowance for church and charities and just told them about it. When they became teens, we told them, “It’s up to you now. You have to give something, but you decide how much.” In a few short years they will be making those decisions for themselves, so we are giving them the freedom to decide part of this issue for themselves while they are still under our roof.
You Can Do It!
As a parent, you can use money to teach your teen how to take charge, be responsible, and have self-control. If your teen overspends, don’t rush to the rescue. Allow your kid to experience the natural consequences of overspending. It will do wonders for your teen’s attitude toward money.