Let’s face it. Teens love to spend money. Their new-found independence comes with an insatiable appetite for carefree splurging on clothing, entertainment, and fun. While some teens do think ahead—and responsibly save for college—few are prepared for economic realities of adulthood. Truth is, most teenagers simply live in the moment, seemingly unaware of the real, adult world responsibilities of having to pay for groceries, housing, and health care.
Remember your first job? Encourage your teenager to work but keep it to no more than 10 to 15 hours per week. Research shows that teens who work more than this are not as successful in school. But being a teenager today is expensive; and, if your teen resists restricted work hours, providing an increased allowance for clothing and personal needs can help. Still, require your child to put at least 10% of each paycheck, or allowance, into savings. It will be much easier to continue this practice as an adult if the habit is formed early.
Getting your teens involved with the family budget can also teach them valuable life lessons. Identify the spending categories that affect them directly and agree on a reasonable amount they can contribute. This will go a long way toward preparing adolescents for the structure and responsibilities of adulthood.
When it comes to borrowing, don't loan your kids money whenever they ask. But do create opportunities to teach them the costs of borrowing and the experience of repaying the loan. Be sure to charge interest and teach them how to use credit wisely, the difference between good and bad debt, and how to avoid the credit card trap.
Finally, teach your child how to set financial goals. And don't overlook the importance of short-term goals, which offer your kids a feeling of accomplishment and a boost in self-esteem.
