Teens and Money

U.S. teenagers spend an average of $85/week.  Eighty-six percent of teens get their money from their parents on an as needed basis.  Yet most teens are poorly prepared to really manage their money.  How can parents do a better job preparing our teenagers to become financially successful as adults?

I believe that  all older children should have a savings account at a local bank.  They should have a set portion of any money given to them or earned, earmarked automatically for their savings.  This should be an account that will later be used for significant purchases like a car or college tuition. 

Again, goal setting is crucial for your teen to learn money management.  Every teen should have worked with their parent on making a budget.  This would include income such as a set weekly allowance, gifts or money earned.  Then the teen should list all weekly expenses.  These can include school lunches, entertainment, clothes purchases, cell phones etc.  If a teen is driving, then they should have a clear picture of their insurance, vehicle maintenance and gas costs. "Needs" should be identified seperately from their "wants."  There are good budget worksheets for teens at many money management websites.

I think the question of whether parents should provide their teens with spending money, the teen should earn their money or the teens money is obtained both ways is completely up to the family to decide.  However, I think that parents do teens no favor by providing an endless amount of money on an as needed basis.  It is better to have a family discussion over the teens budget and then determine a set amount of money that the parents can provide on a weekly or monthly basis.  Then parents need to adhere to their agreement.  If the teen runs out of money a few times, he will better learn to manage spending.

Before teens go shopping, they should learn to make a shopping list.  They should recognize the difference between shopping for a need and what I call recreational or impulse buying.  Teens should learn about shopping options like waiting for sales, using coupons or shopping upscale consignment shops.  When shopping on line they can obtain free shipping or sales codes.  Teens should also understand the additional cost of sales tax. 

There is so much more that teens need to learn about good money management.  Next time, I will discuss teens using checking accounts, ATMs, debit or credit cards.  At some point, I will also discuss teens earning their own money.   I believe that we can all do a better job at preparing our teens for financial success in adulthood.