Trying to teach a teenager about handling money is like trying to teach a toddler to share his toys. It can be done, but it doesn’t come naturally. I have one son who is a saver and one who is a spender. Luckily, it’s the spending one, my senior, who has the job. When he saw his W-2 recently and realized how much he had made, and yet had nothing to show for it but the food in his belly and the accessories for his air soft guns, he realized that he had a little work to do in the budgeting category.
Teaching our kids how to handle money is a life skill that is absolutely invaluable. Here are 4 tips that I believe every parent should know.
1. Start early. We began giving our children a small allowance when they were very young, I would say school age. I got them little plastic storage boxes that had 3 drawers. One said “give,” one said “save,” and one said “spend.” Right off the top they had to put 10% in the “give” and “save” drawers. Then, when a few dollars had accumulated, they would take the cash out of their “give” drawer and put it in the offering box at church. This simply became a habit from that time on. The “save” category could be used for big things, like a bike, or an iPod, or a hamster. If you missed the “early” part, it’s never too late to start. Any money coming to them from any source can be budgeted this way.
2. Model budgeting. As we know if we read the financial pages, credit card debt is a huge problem in America. It’s imperative that we teach our kids early how to avoid that deep, dark hole. My senior asked me recently when I thought it would be a good idea for him to get a credit card and start building up a credit history. My answer to him was that he needed to stay in his budget for several months first. We buy everything we possibly can on our Discover™ card so that we can earn Cashback Rewards™, but we always pay off the bill fully each month. We even put our new roof on Discover! That allows us to supplement our entertainment budget with gift cards. When our kids ask for something, they know I’m going to check whether that’s in our budget or not. They’ve seen it modeled their whole life. We started out our married life 24 years ago using Ethan Pope’s Money Allocation Plan. I highly recommend it. It’s basically the envelope system, but I just do it electronically.
3. Give them the tools. I’m kind of a tech geek, so I have a budget app on my iPhone that syncs with the program on my Mac. When my sons started high school and got their first cell phones (yes, we waited until they were in high school), I had them get the same app I have so that I could help them. I also started giving them the money each month to buy their own clothes and toiletries and whatever else they wanted. They were in charge of that amount each month. We still paid for anything relating to school, but everything else they had to budget. Now, I coach them along in balancing that budget and making sure everything stays straight.
4. Give them the freedom to learn—and possibly fail. Since my senior is a spender, he had a very hard time staying in his budget. If he wanted to grab something to eat, he simply did it. He never took the time to look at whether that was in his budget or not. He wanted to order something for his air soft guns, he just did it. No matter how much we had given him the tools and modeled it for him, ultimately, the decisions were his. When he said he wanted a laptop late last year and asked us if we would get him one for his birthday, Christmas or graduation, we told him we would help, but he needed to save for it. We would match whatever he saved. Then I showed him how, in 13 months, he had spent more than $1300 on food. I said, “There’s your laptop. You ate it.”
When shown on paper how much he had spent just because he didn’t want to make lunch at home, he realized he needed to do what we had originally said: make a budget and stick to it. He doesn’t want to live at home while he’s going to college, but he knows he’s going to have to, a. earn more than he’s earning now and b. be a much better budgeter.
I’m not in charge of his finances anymore, and he’s 18 so he can go get a credit card without my approval, but hopefully he’s learned enough now to know that making good decisions now will help with his financial health in the future.