During t(w)eenage years, the value of money becomes a point of contention between parents and children. Starting with t(w)eens and continuing through the teens, social status lines are often drawn by clothes, possessions, or access to clubs or groups. As a parent, this can be interpreted as items that cost money, stuff that costs money, and activities that cost money. But do your kids know the value of money and your values about money?
The values that you place on money may not match your actions. Unless you connect the two for your t(w)eens, they won’t make the connection themselves. Take for example the role of cash. It used to be that a child would learn the value of money very simply. If he had cash, he had money. If he ran out of cash, he was out of money. Today, credit and debit cards don’t show how much is represented. Checks are also written representations of some amount of hidden money. Direct deposit from many employers goes unseen into the account. In fact, some adults can go days, weeks, or even months without using cash. Hopefully you keep track of your balance, whether in a check register or some other way. But do you have your t(w)eens help you track your finances?
“Show me the money!” -Jerry Maguire
If you don’t have your t(w)eeens sit down with you and work on your budget, what are your reasons? Is it to keep them from knowing how much you make? This action can be interpreted as being embarrassed about having too much or too little money. Is it because you don’t want them to know how much you are spending in a certain area? This kind of action can teach kids how to hide problems, especially spending problems. Are you afraid that your kid is going to tell everyone else about your income and expenses? You can keep your privacy and still pass along the lesson by getting creative and making a budget worksheet for your child.
In an increasingly cashless society, there are fewer chances for children to learn about the value of money. Many kids understand that their parents go to work to earn money to pay for food, shelter, and other items. What they may not be able to understand is just how much work is worth. Some parents give their kids a weekly allowance for spending money. This is akin to paying your kids for existing and doesn’t really have many real world counterparts. Other parents give allowance based on completing a certain set of chores and, better yet, don’t give in when the chores aren’t completed. But what happens to that money once the kids earn it? Do they have free reign to spend it however and with whomever they wish?
T(w)eenage Budgets
Many parents agree that a great way to teach kids about money is to have them work to earn their allowance. However, what lesson does it teach if they don’t have to use that money for some of their own expenses?
There are many things that t(w)eens should not be expected to pay for, including rent, medicine, utilities, etc. However, as they get older, they should be expected to make contributions elsewhere, including their own savings. Teaching kids to pay themselves first teaches a valuable lesson for later in life. You can have your child save $1 out of every $5 in an account and show how compound interest helps them to earn money even faster. Then out of the remaining money from their allowance, expect them to pay for the weekend movie with their friends (and the popcorn and soda).
An Interest-ing Idea
What about the inevitable time that your child won’t have enough money to go out with friends because they have already spent it? This is a teachable moment. Depending on the maturity of your t(w)een, you have choices.
The first option is to not bail them out. Don’t give in to the pleading and begging. Failure to plan ahead and dealing with the consequences of that choice is one way to learn to have a contingency financial plan in the future. Nobody says that the $4 after savings has to be spent each week, and that money can be saved for future purchases, too. This will also help you as parents when it comes time for back to school shopping by giving you the chance to say, “I have $100 budgeted for your school clothes and we are buying 5 sets of clothes. Anything you want above that amount is your responsibility to pay the difference.”
If your child is more mature, you can consider giving a loan to cover the amount they want to borrow. Instead of expecting simple repayment for the amount borrowed, charge them interest to be paid back out of their future allowance. You want your children to understand how money works in the real world. When a person in the real world takes out a loan, they are expected to pay interest. Teaching them how the real world works puts your t(w)eens in the best position possible to be a successful adult.
The Real World Doesn’t Forgive
Generation Y grew up during the financial boom of the 1990’s. Spending and borrowing for many American’s during this time was at an all-time high. As the people in this generation came into adulthood, one of the worst financial eras in our history took hold. Many of these students borrowed massive amounts of money to pay for colleges they couldn’t afford, only to find a crumbled job market and no means to pay off the debts that they had incurred. Because their parents didn’t disclose financial lessons, this generation grew up with the idea that money would always be readily available and they didn’t understand repaying debts. The life lessons of teaching your t(w)eens about money will set them up to make money mistakes now, while the consequences are minor and controllable, rather than later when the mistakes can cause serious hardships.
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