The First Payday: Helping Your Teen Understand Money
Teens vary in their responses to getting a job. Some long for the freedom that having their own money promises. They want an increased cash flow for their clothing end entertainment budgets. Others are less than thrilled. These dread spending so much of their time doing what someone else wants them to do.
Whether your teen is excited or bored at the prospect of having a job this summer, YOU can respond to their newfound extracurricular activity by helping them learn not only what it takes to be a good employee, but how to make the most of the money they’ve earned.
The big, bad, “B” word doesn’t have to intimidate your teen. Sit down with him or her and help them work out a plan for the money they’re earning. Since even the most low-key kid has stuff he wants to buy, motivate him by asking how long it will take him to save up for what he wants. Remind him of any necessary expenses, like car insurance and gas, and encourage him to put away at least a little bit for the future.
Whether your child takes all of your suggestions or not, he’s hearing information that he may not have heard before. If he doesn’t apply it now, that doesn’t mean he won’t in the future.
Talk about Taxation
Many teens are surprised, and not in a good way, when they see how much the government takes out of each of their paychecks. There’s no better time to talk about where tax money goes and why she’s required to pay. If your teen is interested, talk about the different kinds of tax money taken out (look at the pay stub for the amounts).
If nothing else, you can remind your teen that she will probably get some money back the next year. Offer to work with her on her taxes at the end of the year to make sure she gets as much as she can. Then when tax time rolls around, make sure she sits down with you and understands the process.
You can’t make a teenager do anything, least of all save his money. But you can encourage it. Try helping your teen select a specific goal to save for, as t his will motivate him to actually put his money away.
If your teen is going to be paying for some or all of his college expenses himself, remind him of this. Let him know where you’re willing and able to help out, and help him figure out how much he’ll need to cover the rest. Seeing these numbers may help him save, once he realizes just how long he’ll have to work to get there.
It’s never too early to explain credit to your teen. As soon as she’s 18, she’ll most likely have card offers coming to her, so it’s a good idea to make sure she already understands how it works. Make sure she knows that she’s still responsible to pay for everything she purchases, and explain how the concept of interest means she could end up spending even more than the listed price for an item.
If your teen is responsible and you’re comfortable, many credit cards will let you put her on your account. This will give her some “real world” experience with credit cards before she’s on her own.
Be There when They Fail
Most teens will make financial mistakes somewhere along the line. Even if all you’ve ever modeled and taught are good money habits, they’re likely to spend too much, overdraw an account, charge more than they have, or get in some other kind of financial trouble. While you don’t want to bail them out entirely, you also don’t want to condemn or criticize them. Everyone makes mistakes. For teenagers in particular, it’s how they learn.
Beyond all of these suggestions, encourage your teens to enjoy the money they earn. Remind them that, after the work of budgeting and saving, comes the pleasure of spending what is left. Enjoying their money is part of the process, too, and don’t let them forget it!