Share article Financially Intelligent Teenagers: My kids started receiving an allowance this past summer. It was time to give our 5 ...
My kids started receiving an allowance this past summer. It was time to give our 5 year old some meaningful opportunities with money.
At first, understanding how we should allocate funds was a dilemma. I knew I did not want money to be a reward for chores. Not at this stage of the game.
Household chores help kids to develop a work ethic. An allowance helps kids develop money management skills. These are two critical yet separate lessons that should not be muddied by one another. Money and chores should not be interdependent at this stage.
And frankly, I do not like the idea of paying my kids to do the very tasks that I do not get paid to do (taking out the garbage, making beds, folding laundry, dishes, etc).
Our kids get money each week simply because they are a part of the family. They also need to help around the house simply because they are a part of the family.
Giving our kids money has helped achieve many goals:
Money management is learned through trial and error. Simply handing out money is not enough. Money without restrictions leaves kids with a sense that there
is cash to burn. This notion of disposable income is hard to outgrow. Kids need to be taught about money.
Without this, the odds are that they will be living paycheck to paycheck (i.e., in your house) long into their adult lives.
Since some will be curious – our 5 year old receives $2 and our 2 year old receives $1. We give them money at our weekly family meetings
The following are good guidelines for helping your kids manage their money effectively.
Even with good training, teenagers can sometimes have real difficulty with the onslaught of credit offers they receive, usually in the senior year in high school and early college. Times have changed since we fathers were teens. A credit card was seen as a mark that you had "made it"--that you were credit-worthy. Today, teens get offers in the mail for cards with credit limits that make us cringe. What are some guidelines for helping your teens treat credit with the respect it deserves?
Teach Teens to Budget Money
Teenagers need to see how money works in the real world, including where it comes from and where it all seems to go.
Teaching Money Management
Budgeting is second nature to some of us, and very difficult for the rest of us. It is important to teach your teen how to conserve money, along with teaching them how to spend their money properly. The problem with this is, they need to get money in the first place. That is one of our many roles as their parents, we get to turn into their first employers. Remember, I feel part of an allowance should be based on responsibilities, ie chores.
Teens need to learn how to crawl before they learn how to walk. A steady climb in how much money they receive and what they are responsible to purchase and/or save with that money is my suggestion. Slowly going from having no responsibility with their money to having full responsibility for their personal purchases is the easiest for them to understand, and the least frustrating way to teach a teen money management.
Starting around the age of 12 years old, for about a year, give them 'blow money', ie 1 to 5 dollars a week to spend on anything their heart desires. Do not require that they purchase something or save any of it. Still pay for their activities with friends or things they like to have that you would normally do. The reason for this time is to enable your preteen to know what
it feels like to have their 'own money'. Of course, you don't want it to be a lot of money at this point. By skipping this step or adding it on to the next step, you are causing more frustration than neccessary, for both you and your teen.
One more note on the 'blow money'. This is the money you take away if responsibilities, ie chores, are not met. When you add $5 to the pot for activities or whatever(explained in next paragraph), do not take that away as a punishment, instead take the activity and make them save it. This way you will keep teaching them their money management, and still be disaplining them. There comes a span in every teen's life when it seems like your always grounding them. This can hinder teaching them the responsibility of having money if the punishment of not having any money goes on too long.
From the ages of 13 to 14, you can add to money amount, and to the responsibility. Some suggestions:
From the ages of 15 to 16, have them budget their own clothing. Hand them a piece of paper with $1000, (you pick the amount), at the top. When shopping time comes
around, or they need a pair of socks, they can subtract it from their budget. Actually have them take the receipt and subtract the amount, plus any tax. If you give them money to shop for
themselves, subtract the amount you gave them, unless they bring back the change. This will teach them why $150 sneakers aren't worth their price tag.
The only problem I have had with this amount is, and it happens with boys, growth spurts. Girls are generally developed at this point, though they may go up a size in a year. Boys, on the other hand, go from being a size 8 shoe and 5'4" tall to being a size 11 shoe and 6'1" tall in two months. This is going to mess up their clothing budget.
For the ages of 17 and 18, try giving a monthly allowance. If they do not have a bank account, they should get one, with a mac card. This is one of the times in which you will need to trust them. Be the co owner of the bank account, so you can always check the balance if you feel there is a need. The mac card is important, it will save you from handing them money because the bank is closed. Instead of giving them a piece of paper with the clothing budget money on it--pay them in monthly installments. Make them responsible for saving that money for when they will need it, like for school shopping.
What if they blow it?
Natural consequences....they wear last year's coat. It will be a much easier lesson to learn then if they have to learn it when they are on their own.
What if I don't like what they purchase?
You don't like it or it's offensive? We are not going to like what our children are wearing 100% of the time, probably not even 50% of the time. But if it is offensive to you, make them take it back. Give them a choice, take it back and get your money back for something else or throw it out. In other words, it's brick wall time. Just because you have allowed them to make purchases for themselves, does not give them cart blanche to offend you.
The ABCs of Making Money 4 Teens
The Complete Idiot's Guide to Money for Teens