A summer job is not only the first time a lot of teens earn their own money, but it’s the first time they earn a regular income that provides them with a decent amount to spend or save. Wanting to spend their earnings on ‘wants’ is a natural impulse for teenagers, making this a perfect time to teach teens the importance of money management and saving for the future.
Here are some tips for helping teens manage their money:
Have the talk – Before your teenager starts working, sit down with them to discuss finances. The most important topic? Their post-secondary education. Do they hope to go to a state school or are they aiming for the ivy leagues? Whether you and your partner plan to provide partial, all or no financial support, it’s important that your teen understand what they are in for financially when it comes to their college education.
Set a budget – Learning to set and stick to a budget is one of the most important financial lessons your teen can learn. It will teach them how to plan their spending, help them understand how to strike a balance between spending and saving, and will show them how to save for things they could not afford otherwise.
Once you’ve discussed who will be paying for your teen’s college education, you need to outline how it will be financed. Start by listing all estimated expenses – including housing and food, books and tuition. Then determine the amount of earnings they should set aside for these expenses if they will be contributing to financing their post-secondary education.
Establish reasonable goal for saving – Your teen is likely working hard for their money, and whether they will be responsible for financing all, some or part of their post-secondary education, they deserve to enjoy some of their earnings.
Time is money – Help your teen become a responsible spender by encouraging them to take their hourly rate into consideration when they make a purchase. For example, if they are earning $10 an hour, and want to buy a shirt that costs $50, it will take them five hours of work to pay for it. Once they’ve taken this into account, they may think twice before taking out their wallet.
Lead by example – Remember that your teen is watching how you manage your money. Be a good role model by demonstrating good financial habits. If they understand that you and your partner take measures to save before you spend, your teen will likely follow your lead.
What tips do you have for helping your teen manage their money?