Teaching Teens About Money
Teenagers learn by gradually taking on more and more responsibility. For many parents, this involves giving their children a limited amount of control over financial decisions. According to figures released in a 2004 Teen Research Unlimited Study, teens aged 12 to 19 spent an average of $91 per week. This weekly spending figure includes both teens’ own money and the cash they receive as gifts and allowance.
If you choose to give your teen an allowance, take the time to teach them how to manage their money. After all, more than 71 percent of teens report learning about money management from parents. Establish an agreement on what the allowance covers. Consider providing extra income opportunities to help them learn that money is something you earn, not something you are entitled to. This is also a great way to get them involved in extra family chores.
Another effective tool is to get them involved in the car buying process, whether the car is for them or for the whole family. Discuss with them such issues as what the car can be used for, who is responsible for gas and maintenance, and who can actually drive the car. Show them how auto insurance works, including how much the premiums increase when they start driving, as well as how much it rises if they have an accident or traffic violation.
Get them involved with your day-to-day personal finance decisions, such as grocery shopping. Have them help you with the grocery list and show them how to comparison shop, pointing out how much money you save through comparing prices and using coupons. Let them sit with you while you pay the bills, so they can see how much all the monthly obligations, like utilities, phone bills, the mortgage, and insurance, add up to.
Encourage teens to save their money toward a major purchase, even offering to match their savings with an additional 50 cents per dollar saved. This is a great way to teach them the relationship between building a savings account and the positive rewards that follow.
Finally, it’s important to show teens how credit cards work. You might even consider showing them your bills when you pay them. Too often, young adults who get their first credit card perceive it as “free money,” and find themselves in debt very quickly. Make them understand that the $50 they charge today costs a lot more if they don’t pay it off quickly.
Reprinted with the permission of Money Management International. © 2008 Money Management International
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