Managing money can be challenging long before responsibilities like car and rent payments enter the picture. Teens are faced with lots of wants and tight budget constraints, especially during the holiday season.
The fourth phase of our Growth Model, based on Dr. John Townsend’s work, is competence. Competence is the ability to be productive in the world and contribute meaningfully to others. To help teens attain competence as they transition into adulthood, it is important to teach them how to manage their money.
Here are five suggestions to help your teen learn how to live within her means.
- Share real-life examples.
Let’s say your teen wants a new iPhone 7 for Christmas. It is too expensive for the family budget, and she’s not likely to get it. But instead of just telling her it’s impossible, explain to her why. For example, you may just have had a pricey car repair. Explain to her how much it cost and its effect on the family budget. She may be disappointed but she’ll appreciate knowing the family’s situation. It will also give you a chance to explain money management strategies such as budgets and emergency savings.
- Encourage them to make money.
It is important for teens to make their own money. By babysitting every other weekend or being a hostess at the local café, your teen will learn how to manage her time, be responsible to an adult outside the family, and appreciate how hard work pays off. When your teen is making her own money, she will better understand its value because it cost some of her time.
- Start a savings account.
Help your teen get into the habit of setting money aside, even if it is only $5 out of every paycheck or payment. She’ll learn that small, steady deposits can lead to a nice chunk of change in a few years. And that will be important when she starts thinking about college or getting a car.
- Ask her to write down her needs versus her wants.
Encourage your teen to write down her needs and wants to help her prioritize her spending. If she wants a new dress for Christmas, she might need to dial back on eating out with friends. She’ll be doing this balancing act her entire life, so it’s good to get started early.
- Let her make mistakes.
Some lessons need to be learned firsthand, like having an emergency fund. If your teen were to get in a fender bender, ask her to pay you back part of the expense, either from her savings or by doing chores around the house. As a parent, sometimes it’s important to step back while your teen figures out how to handle an unexpected expense or opportunity. It will let her exercise her troubleshooting skills, and it will show her you have faith in her judgment.
At Compass Rose Academy, we use and teach Dave Ramsey’s Financial Peace University for Teens. To learn more about our student educational and experiential activities, contact us today.