When Jana M.’s fourteen- and sixteen-year-old sons were younger, she gave them a monthly allowance and told them to put some in savings, some in their wallet, and a small amount toward something charitable. It didn’t work.
When her son Grady, sixteen, started working, his allowance stopped, and the money he earned went right into his wallet. Looking back, Jana realized she hadn’t taught her kids to make their own responsible money decisions.
“It may have been more effective sitting them down and getting their input so they felt like part of the process and, in turn, more accountable,” she says.
With Grady’s “zero balance” savings account looming over both of their heads, she’s likely right.
Saying the Words: Telling Your Kids All About Money
Sure, no one likes to discuss money—it’s considered private. But with a looming recession, housing slumps, and teen stars living a conspicuous high life, having the money talk with your teen is more critical than ever.
What is money for? Why do we care so much about it? When do you save, and when do you splurge? When do you give away money to others and when do you keep it for yourself? What’s the difference between needs and wants? These are all significant questions that rarely—if ever—get asked and answered in most homes.
Using a Gradual Approach
A 2008 Charles Schwab Parents and Money survey found that sixty-nine percent of parents feel less prepared to give their teen advice and guidance about investing than they do about sex. Relax. You don’t have to address everything money-related with your teen. For now, just cover the basics.
“First of all, understanding the value of a dollar, using it wisely, and budgeting is critical for every young person,” says Carrie Schwab Pomerantz, chief strategist of consumer education at Charles Schwab & Co., Inc. “The best way to teach a child about budgeting is by giving them an allowance at a young age. You have to have a conversation about how the allowance is to be spent.”
You can suggest your teen use her allowance for some of the items you normally purchase, like shampoo, haircuts, and movies. They can also appropriate some as “fun money” and some as savings for a big-ticket item, like a new car or contributions to their college fund.
