Teen Money Management

How to teach your teen money management at an era in which a click on a banner can result in an expense of few hundred dollars per month? How to run the business called ‘family’?

“Mommy, I Want This!”

Teen Money ManagementOne of the major tasks parents are faced with is raising kids in an ever growing material environment that offer plenty of temptations for small kids and especially teenagers.

Today’s kids are exposed throughout the day to an endless stream of ads and commercial content that show up on TV, Radio, Magazines, Internet, Social networks and that are even sent directly to their cellular. Too often do parents find themselves helpless against the ever so growing demands of kids that keep repeating sentences like “Mommy, Can I get this” and “But every one else has it except me!“.

While in the past money management used to be adults-only territory, today’s youth is exposed more than ever to financial issues, a situation that requires running a strict family money management and instilling financial knowledge and skills.

Financial education, particularly at young age, is crucial for running a proper family’s budget. Keeping an open and sincere dialog based on good communication, cooperation, help and understanding between parents and their teens is a key stone in forming a healthy family economic policy, as well as for instilling indispensible financial skills for kids growing in modern age.

Family Money Management – Maintaining a Balanced Budget

Family Money ManagementKeeping a family budget is no longer a private matter of one family or another. Too many families find themselves in an ever growing debt situation, and financial difficulties are no longer the sole part of the lower classes. Families of all economic backgrounds, even high class ones are running into financial difficulties due to poor family money management.  

More and more families find themselves under the pressure of growing debt (Mortgage, Credit, Loans and Car Lease) and as a result neglect important issues such as Pension, High Education, Long Term Care Insurance etc.

Modern society has transferred all financial responsibility for family welfare to its citizens. They are the ones that ripe the fruits of good financial management, or carry the consequences of poor management.

Taking personal responsibility over the family’s budget and financial management has implications beyond profit alone. Families report on control, increased sense of confidence about the future, stronger family ties, better understanding of the children’s place in the family’s finance situation and better parental authority.

Prof. Amos Rolider, a specialist in development psychology for children and youth believes that failure to deal correctly with financial issues is just a small part from a larger symptom of loosing parental authority, which in turn results in parent that are unable to withstand the pressure from their children, living in an era of abundance and that are exposed to advanced technologies.

The main reason for this, in Prof. Amos’s view has nothing to do with the parent’s wisdom or education, and is cause by the parent’s low availability to their children.

While in the past parents use to spend at least two hours on average with their children, today that time averages to 15 minutes a day only. Combined with stress at work, marriage problems, guilt feelings toward the child and love – the result is a parent that has difficulties to stand against the pressure from the child and is unable to say ‘no’.

The high rate of divorce is contributing even more, as parents try (consciously or unconsciously) to ‘buy’ their way towards the child with money, sometimes using them as a weapon.

In most families today there is no culture of saving. At birthdays the children get so many presents that they are unable to value them anymore. A child that looses a toy usually gets a new one instead, and doesn’t learn to take good care for his/hers belonging and valuables. Not to mention that most teens have no idea how much they pay for their cellular.

We live in an unhealthy situation, in which children do not learn to save. It’s the parent’s duty to teach their children to save and run their budget. It’s important to teach the children the connections between how much money you’ve got to what can you afford yourself to buy.

Before heading to the shopping center it is imperative that you explain to your kids that “You need to decide in advance what you want to get. You’re not getting anything beyond that!”

We live in wealthy society were everyone wants to pamper their children. By doing so however, we’re unconsciously harming them. It’s important to understand that a child that learns to restrain himself, wait patiently and postpone gratifications will grow up to be a financially responsible person that can live within his limits and is capable of saving.

So how should parents stand up against the heavy pressure exercised by their children, and especially the “but everyone else besides me has it”?
As with every aspect of children education, parents shouldn’t be afraid of their children. Parents should be able to stand up to their children and say “No”.

Withstanding pressure as part of maintaining the family’s budget according to its financial capabilities, keeping things in perspective and instilling values of simplicity and modesty – these are the tools available for parents. This is how parents should be capable of contain the child’s disappointment and anger when he/she doesn’t get everything they want.

Sharing Responsibilities with Your Kids

While previous generations used to hide financial matters from their kids and all money talks were delayed until the kids were sound asleep – today’s specialists recommend (both from the psychological-educational point of view as well as the financial one) to share it with them.
The logic is clear: Today’s children are consumers by themselves, and as such they must understand that the family runs on a budget that divides between all family members.

The concept that children shouldn’t be involved in financial matters is no longer valid. Financial responsibility is no longer a sole parent’s domain. Children may share some responsibilities, and it is even recommended that they become an integral part of correctly managing the family’s budget.

From the moment children can grasp the concept of money, it’s the parent’s duty to teach it to them. Much like every society or organization depends on relationship and cooperation of the members, so does a family.
If you’re unable to confront your children while maintaining mutual respect toward each other, than how do you expect to lead your family to success?

What should parents do regarding an allowance?
Recent surveys show, quite surprisingly, that in most families children do not get an allowance, but rather ask for money as needs arise. This is wrong for two reasons:

  1. The child doesn’t learn to run a budget and prioritize his/her needs.
  2. Parents are not in control over the money they spend, and the family budget might get out of balance.

The solution is to set up an allowance, with the child’s cooperation.

Money Management Advice - Youth Cellular BillsWhat about paying the child’s cellular bills?
Cellular bills are an excellent candidate for instilling teen money management, financial building blocks and capabilities.

Numerous parents find themselves amazed, faced with huge cellular bills each month. How can they teach their children financial responsibility and independence, while the child throws away tens or even hundreds of dollars unnecessarily?

For some parents however, a child’s cellular phone is a way for the parents to maintain some control over the child, and even contributes to the parent’s peace of mind, knowing that the child can ask for help at any time.

Putting your child on a pre-paid deal may help parent control their child’s cellular bills. It is true that these deals incorporate higher rates, but the advantage of controlling the bill can’t be looked over.

So how to prioritize the kid’s cellular usage?
One option is to split the pre-paid sum into two separate purposes. The first – maintaining contact with the child should be paid by the parents, while the rest of the bill should be paid by the child himself, as part of his/hers allowance. Such arrangement has the benefit of teaching the child about maintaining budget and prioritization, as any accidences are paid by the child himself (out of his allowance).

Another option is to seat down with your teen and analyze together the cellular bill. Dose most of the bill goes to calls? Who do they talk to – family or friends? Do they usually call during evening or day? Do they call their friends while at school? If so than why? Do they send a lot of SMSs instead of calling? Do they use the data service a lot?

Use the analysis not only to save money and find a more suitable deal, but also to instill your child with financial tools, and much more important – teach him/her a lesson in prioritizing, and the true cost of unnecessary pleasures.

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