“When I became a man, I put aside childish things.“
Between the carefree days of childhood and the many stresses of independent living, there’s an extraordinary no-man’s land called ‘the teenage years’. Handled the right way, these years can provide the ideal forum for your children to ‘put aside childish things’ and get ready for the grown-up world.
In the modern world, of course, managing your finances is a major part of maturity. So how do you actually teach your kids to budget before they fly the nest? These five steps might not transform your offspring into budgeting geniuses – but it’s good to start with the basics…
Step 1: Introduction to Budgeting
Give your teenager a fixed allowance. Help them figure out what they’ll need to do with it: if they want to buy music, games, and clothes, and still finance some kind of social life, get them to think about how the available funds need to be split up.
Everyone’s different, so that might involve a few separate piggy banks or a spreadsheet on a PC – the important thing is that they learn to see their spending in terms of categories.
(Of course, you don’t need to introduce this ‘division’ idea straight away. You might choose to let them make a few mistakes first, then come in with a solution once they’ve discovered the frustration of running out of cash.)
Step 2: Decision-making
Let your teenager make their own decisions about spending. Simply being responsible for their own cash can really open their eyes to the difference between ‘want’ and ‘need’.
Once kids realize that they can buy Shirt A and go out for an afternoon with their friends and have some money left over – or buy Shirt B and have no money left until the end of the month – they’re likely to see prices in a different light!
Step 3: Opportunities
Give them the opportunity to earn a bigger allowance. You might suggest extra chores they could carry out, or increase their ‘hourly rate’ if they learn to do a better / faster job.
The trade-off between spare time and spare money is something they’ll have to get used to in adult life, so let them figure out how much effort they’re prepared to put in to get the things they want.
Step 4: Introduction to Real Life
If you feel comfortable with your kids knowing the ins and outs of your finances, why not show them a real budget? Show them how little of that seemingly impressive ‘income’ figure is left over once the ‘outgoings’ have soaked up their share.
They might be dismayed when they see how many expenses there are (and how much they add up to). They might also be encouraged to work harder at school if they understand how important it is to get ‘income’ as high as realistically possible!
Step 5: Learning from Mistakes
Once they’ve grown up and left home, they’d better not expect their boss to give them more money just because they’ve spent their salary too quickly! It might sound harsh, but be prepared to say no if they come asking for more. It’s a tough part of parenting, but as they say, the more you help them…
You could offer to go through their finances with them and figure out where they’ve gone wrong (even if the offer’s met with a sullen silence). You could offer them a loan, but make them commit to a repayment plan. After all, that’s how real life works – and preparing for real life is a huge part of what the teenage years are all about.
Once they’ve grown up…
There are professional services out there that can help adults manage their money better, including different types of current account. For example, there’s the two-account system you can read about at http://www.thinkbanking.co.uk/account/current-account/, which can help people in the UK budget and get their bills paid on time.
Once your teenager has grown up, they might decide it’s worth paying for professional help with their finances – or they might decide to check out how the professionals work and see what they can learn to do for themselves. The more you can teach them about budgeting and money management while they’re teenagers, the better equipped they should be to make that kind of decision in later life.
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