Research overseas is clear: money management is one of the top issues that teenagers grapple with. Among teenagers, budgeting was a concern, and learning how to save and how to budget amongst their biggest priorities.
Why is this so? In part because financial capability education is not taught at schools. And, in part this lack of teen knowledge of money matters results from parents not doing a good job with teaching their teenage kids about money.
And research is also clear about on other thing: teenagers who learn about money management from their parents and family’s approach to managing money are likely to carry those money skills for life. The role of parents vis-à-vis money management is, therefore, is critical as it sets the benchmark which their kids are likely to follow (and this includes the setting of a negative example).
So what can parents do to teach their teenage age children about money? Here are some steps recommended by Capital One and IND Direct.
- Encourage your kids to get a job
Whether this is a holiday job or a daily job carried out after school taking on a job teaches the kids the value of money – it does not come for free, and it takes hard work to earn some money. The kids should be encouraged to save some of the money by setting a financial goal which they are to work towards to, and use the rest freely as they wish, though complemented by nudging them to balance the spending between needs and wants.
- Turn Shopping into money lessons
Encourage your kids to join you on your trips to the supermarket or the grocery. It is a practical way of explaining spending and saving. Make a game of finding the most affordable product and in ensuring that that the spending trip is within budget.
- Practice what you preach
Dishing out money management rules and then you acting otherwise sets out the wrong example, with your behaviour the most likely to impact the kid’s money management attitude.
- Keeping it simple
Money management is not the easiest of subjects. It can be jargon heavy and can easily turn into an economics lecture. Use rule of thumbs to achieve understanding and nudge your kid’s behaviour. Associate spending advise you provide to your kids on matters the s/he can easily associate it – by making you money advise relevant it is likely to resonate even more.
- Be open about the family’s budget
Be open with your kid – include him/her in the family discussions on the family’s budget and spending plans; what is affordable and what is not and why. By taking the time to discuss these things openly and honestly, your kid will be better prepared to manage his/her finances in the future.
- Pocket money is to be earned
Do not give the weekly pocket money to your kind without strings attached. Receiving ‘free’ money is likely to undermine the important lesson that it takes hard work to earn money. Tying pocket money with a home chore, whatever that is, imparts to your kid that money does not come freely in life and that it takes hard work to earn it.
- Teach about the pros and cons of credit cards
Credit cards offer major benefits to those who are mature to handle them – conversely they can have a major negative money impact if they are misused. Letting your kid understand what constitutes good handling of cards before s/he gets access to them, and continuously re-enforcing the message will stand them good in life – particularly during those periods in life where s/he is cash strapped and a credit card presents an ‘easy’ way out.