Money-Smart Teenager

Have birthday toys been replaced by dollar bills? Is the gift card now at the top of the Christmas list rather than clothes? Is your child now claiming an allowance? With high-school on the horizon, it’s likely your child will want to go on outings with friends. In sum, your newbie consumer is increasingly exposed to money choices. So what can you do to provide some kind of structure regarding your teen’s money habits?

Don’t spend it all at once… and SAVE!

First off, children need to understand―meaning you need to explain―that even if they receive an amount of money, they don’t have to spend it all straightway. Encourage them to save some of it. If you haven’t done so already, you could trade in the piggy bank for a new savings account and accompany your child to the bank on a regular basis to encourage account deposits. Then, take a minute to go online to view his or her account statement; your kid will beam with pride as the balance in the account increases!

Eventually, you could spread out allowance payments. Instead of giving small amounts weekly, give your child an allowance payment once every two weeks, and then progress to once a month. Your kid will have to learn to spread expenses over time. If he or she spends everything on snacks the first week, not having enough to go to the movies the week after will be a real disappointment… and a valuable life lesson.

When your child turns 13 years old or so, its time to learn about the fine art of budgeting! If you give your teen an allowance, help him or her establish what falls into regular expenses and how much could be saved for a specific (more expensive) goal, such as school trip or a new video game console. Some teens may even want to make a donation to a charity they believe in. Children who are accustomed to following a budget understand the financial benefits of this habit early on in life (control over their spending, reaching goals easily, avoiding unpleasant surprises, and so forth). Such children are more likely to continue budgeting as they mature, perfecting their plan according to their new obligations and financial objectives which, as we know, tend to increase continually. Planning a monthly budget will become a routine exercise rather than a daunting task.

Keeping track of spending... Yes, that includes cards too!

Cash has the advantage of being easy to count: kids know how much they receive in pocket money and see their loot decrease as they spend. Eventually, they will likely receive gift cards to spend in their favourite stores and will probably have the reflex to choose their purchases more carefully, understanding that the card does not grant access to limitless funds. It’s crucial to foster this consumer behaviour! I say this because not so far off in the future, for practical reasons, your child will use a debit card and, yes, a credit card! Many parents worry that these cards encourage their children to spend without counting. To remedy the situation, some parents give their teenagers pocket money in the form of a prepaid credit cards. This instils a certain spending responsibility in their children, as they become accustomed to thinking about the relevance of their purchases before buying and will maintain this self-control when they become holders of a real credit or debit card.

Lead by example

Are you saving for your dream kitchen? Did you set up an RESP for your child? Speak openly to your child about these things. What is the total amount you need to reach your goal? How much do you put aside for it monthly? Have you had to cut back on other expenses to reach your savings goals?

As for your kids, do they want to give their rooms a makeover with a new coat of paint, night stand or bedspread? Asking them such questions will raise awareness on the various reflections involved, the choices to make and the fancies to forgo in order to achieve their objectives.

Of course, for a project you consider to be more ambitious and to which you want to contribute, you could encourage your child by matching his or her savings. The more money your child puts aside, the more you contribute.

There are obviously many different techniques to teach young people to save. Parents must find a method that works for them, and one that will suit their child’s character. The important thing is to take the time to show your teen the benefits of saving and instilling money-smart habits. It's a gift that will last a lifetime!