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Helping teenagers manage money.
Learn to demonstrate how good money habits work in their favour in the short and long term.
Give your teen responsibility.
Pocket money is often the first financial responsibility we have; but its purpose can be more than just a bit of fun money. Rather than just giving money away for free, pocket money should be earned (as in the real world with wages) – if jobs aren’t done, pocket money doesn’t get paid. By giving them the freedom to manage their earned money themselves, they’ll learn valuable lessons about the importance of budgeting and responsible spending. Which leads to the next point…
Talk to your teenager about their financial goals
If they haven’t thought of any, or don’t have any plans, work on some with them. Having the conversation early on is important as it teaches them to consider how money will be spent before it happens. But things might not always go to your plan…
Let them blow it all at once – and then let them pay the price
Part of giving your teenager the responsibility to manage their own money is giving them the freedom to make their own mistakes. When they first start having a regular income (whether it’s pocket money from you or income from part time work), they’ll face the temptation to spend the lot in one hit, and chances are this will happen.
It’s important if it does happen you let them live with the consequences. It might be easy to act as their ATM when they run out of money, but by letting them live with the reality of having to go without income until they next get paid, they’re more likely to learn financial responsibility.
Which of course leads to the importance of…
Having a spending plan.
You don’t need to be managing a household worth of expenses to see that having a simple spending plan can still have the benefits of setting good money management skills. A good plan will have set amounts for spending on weekly fun and entertainment as well as money set aside for saving for different milestones. As with younger children, encourage teenagers to split their money in three: save, spend, and share.
Demonstrate positive savings habits
Your teenager is likely to be more motivated when they have a savings intention in mind. Let’s say a short-term objective may be for a new pair of trainers, while a longer-term ambition at the same time might be for spending money for a trip the family is taking later in the year or for their first car.
Think about putting a little bit away on a regular basis
Encourage them to put a little bit aside each time they get paid, both for smaller and larger milestones. Contributing to a savings account on a regular basis is a great way to see money grow over time while also developing the habit of setting money aside for a rainy day (the unplanned events like their first car breaking down).
Set the right example
As in other areas of life, teenagers are likely to copy the financial behaviour of their parents. That means if you’re in the habit of saving up to buy something, they may be more likely to do the same.
One way to set the right example may be to include them in some of your financial decisions. If you can, send them off to the supermarket with a strict budget in mind, and whatever money might be left is theirs… provided they got everything on the list.