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Children are quick to sense the power and symbolic value of money.
Long before they understand such concepts as saving and borrowing,
they see the emotions their parents associate with those actions.
They are also quick to notice their parents' different responses
when they spend some of their allowance on a candy bar versus when
they put it in a piggy bank.
While younger children often find frugality as distasteful as spinach
and some spend every quarter before it has a chance to get warm
in their pockets, this should change by early adolescence. Their
ability to think abstractly in sophisticated ways and to plan for
the future is often reflected in how they spend their allowances
and earnings.
Ideally, teenagers should be using what investment advisors call
an asset-allocation strategy, which at this stage of their lives
is more of a spending strategy. Their purchases should be less impulsive
than they were a few years ago. They should be able to delay gratification
sufficiently to save at least part of their income in order to pay
for relatively expensive items.
Parents who try to dictate how their children handle their own money
often find that those children spend recklessly as a way to rebel
and to assert their independence. This can quickly turn into a vicious
circle. The parents interpret their children's spending pattern
as a sign of the need for even more rules and restrictions. The
children respond by spending money even more inappropriately because
they see what's happening as a battle over privacy and maturity,
not finances.
According to Dr. Kenneth Doyle, a psychologist at the University
of Minnesota who specializes in the psychology of money, those families
who have the biggest problems with adolescents are those in which
the parents believe in very strict controls on their children. While
the intention is almost always good, they try to do it too much.
He advises that the more important money is to you as a parent,
the more important it is for you to give freer rein to your children.
While some children respond to this by becoming spendthrifts, others
become too frugal. I'd be concerned about a thirteen-year-old who
was saving most of her allowance for college. Such extreme behavior
is almost always a reflection of the symbolic and emotional importance
of money among the adults in her family. As with the teenager who
immediately spends all of his cash, the compulsive saver has learned
that such behavior gets her attention, even if it results in self-sacrifice
or, in the case of a compulsive spender, punishment.
While some small amount of savings would be developmentally appropriate,
it's important that a child this age learns how to spend most of
her money on more immediate and short-term goals. She should be
having fun while she explores the power and implications of money
in her life.
Perhaps the most important lesson teenagers and younger children
can learn about money—and the most effective method of teaching
them how to save and spend it—is that of taking responsibility
for their own financial decisions and actions. Ideally, adolescence
should be a time for making mistakes because the consequences are
usually minimal and lessons can be learned without too much pain.
Home and family offer the support needed to recover gracefully from
those mistakes. Better a child should first learn at age sixteen,
when he's living at home, what happens when you don't plan for basic
expenses than that he should learn that painful lesson at college
or when he's living in an apartment at age twenty-five.
A few years ago I interviewed the director of a consumer credit
counseling service, who said that many of the people he sees had
parents who overprotected them or bailed them out of monetary problems
when they were teenagers. The message these adolescents learned
was not how to spend money wisely but that if they get into trouble,
someone else will fix it for them. That is an expensive and emotionally
training misconception.
There may be other emotional issues for the parents as well. A few
years ago I sat in on an ongoing workshop for the parents of teenagers.
Money was a recurring theme in their discussion. One (very well-do-do)
mother was concerned that her two daughters, ages sixteen and seventeen,
showed little responsibility in their financial affairs. When pressed,
however, she said that whenever they wanted to buy something and
didn't have the money, she simply gave it to them.
The more she talked, the more it became clear that despite her protestations,
she craved her children's dependence on her and was reluctant to
give that up. Since her teenagers we not longer physically dependent
upon her, she had encouraged them to become financially dependent.
Until that mother dealt with this underlying issue, she would continue
to sabotage her daughters' relationship with money and, in the long
run, with her as well.
Here are some things to keep in mind to help teenagers learn to
handle finances:
- Don't be concerned if a young adolescent "wastes"
a lot of his money. What seems a poor decision to a parent can
often be a valuable lesson for a child. Let teenagers fritter
away some of their money and see the consequences of that. Instead
of lecturing them on their mistakes (which will cause them to
focus their attention and emotions on you instead of on their
actions), help them explore what they did and talk about alternatives.
- Involve teenagers more in family finances, not only regarding
major financial decisions (i.e., Can we afford to take a vacation
this year? How can we pay for college tuition?) but also the nitty-gritty
of family bookkeeping. I find it useful to have a teenager write
(but not sign) many of the family checks and reconcile the account
before letting him have his own checking account. (Be sure to
check his addition!)
This serves two purposes: It gives him practice in the mechanics
of small-time bookkeeping, which is a prestigious adult-style
responsibility that acknowledges his growth and maturity. Also,
it helps him understand that you don't get to spend all of your
income on stuff that's fun. The utility bills have to be paid
before you can see if you have the cash to go to the movies
- Expect your children's spending habits to reflect their stages
of development. That will help you keep a sense of perspective,
even if you disagree with how they're spending their money. For
example, since adolescents are trying to define who they are,
you should let them use their money to do that, even if you think
the clothes and music they buy are obnoxious or just plain silly.
(When in doubt, look at pictures of you when you were that age
and ask yourself whether you'd still wear those clothes!)
- Be creative in helping them make decisions without dictating
what they'll do. If your child wants you to buy him a pair of
designer jeans, and you think it's wasteful, work out a compromise
in which you both participate and get what you think is right.
For example, offer to pay the price of a generic pair of jeans,
and let your child pay the difference for the brand he covets.
In other words, you buy the jeans and let him buy the logo.
- If you lend money to your child, make it a formal arrangement.
While you don't have to pick up a fill-in-the-blanks legal document
from the local office supply store (although your child might
take the transaction more seriously if you do!) you should at
least put the terms down on paper and have your child sign it.
This isn't just because the sums are larger than they were a few
years ago. It's an acknowledgement of your child's maturity and
recognition of his ability to plan ahead. I feel it's also a good
idea to charge interest. While the actual amount your child will
pay on such small and short-term loans is trivial, it helps convey
the idea that this isn't "free" money.
- Don't rush in with loans to help your child buy expensive items.
Such acts of apparent kindness may backfire because teenagers
haven't had the opportunity to reflect on what it means to spend
that much of their income. The act of delaying a purchase by saving
for it gives children a chance to think about how much they really
want a particular item and to value it more when they do purchase
it.
That means that if you want to chip in on an important item to
help your child buy it, don't put up your money first. Instead,
offer a matching grant so that you'll put in your money only after
she's saved up enough for her share.
- Let your child deal with and recover from the consequences of
his mistakes. When my older son was 17 and had his first checking
account, he never bothered to balance it. When I mentioned to
him (repeatedly, I must admit), he told me that it wasn't necessary
since he "always knew" how much he had in the account.
One day he wrote a $25.00 check to his tennis coach. The check
bounced due to insufficient funds. The coach's bank charged him
$20.00 in fees; his own bank charged him $20.00 as well. All of
a sudden he needed not only the money to make up the balance but
an extra $40.00 for the bank charges.
He looked at me in anticipation. I simply shook my head and said
that it wasn't my problem so I wasn't going to use my money. He'd
have to find some work to pay him what he needed. He spent the
next weekend cutting up fallen trees and doing other heavy labor
to pay the bill. Since then, he's balanced his checkbook regularly—I
think.
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