Allowance for Teens… Respecting the Almighty Dollar (Part 1)

Tips on Teens #025a

Odds are that your teenager has no appreciation for the value of a dollar.  According to the 2014 Teens and Personal Finance Survey from Junior Achievement and Allstate Insurance, 77% of teen boys and 63% of teen girls aged 16 to 18 do not keep track of how their money is spent.  A 2012 poll from ING Direct and Capital One discovered that 87% of teens report that they know little to nothing about managing money.

Let’s take a look at how the end of 2014 might have summed that all up for you.  The gift giving holidays just passed.  Did your kid take for granted all those expensive gifts that you worked so hard to pay for?  Are the brand new designer clothes that you bought for your teen balled up in the corner of her room?  Is that new smartphone that he begged for  already scratched up after being dropped three times… on the same day he got it?

Yes!  How did you know?  Why would he beg and plead for his new iPhone but then treat it like he could care less if it broke?  Does he think I’ll just buy him another one?

Well… ask yourself this:  In the past, have you bought your child something a second time because he said, “I need a new one because my other one isn’t working anymore for some reason.”  (Teenage code language for: “I want the newest high performance headphones… I think I’ll put my old ones in the dishwasher”).

If you answered “Yes” to my question, then perhaps your child doesn’t take great care of his things because he knows that another one, perhaps even bigger or better than the ones he just accidentally heat-scrubbed with the pots and pans can easily be had.  After all, you don’t want HIS music (that’s music?) rattling the windows in your house.

If you answered “No” to my question, but things keep mysteriously breaking, then luckily you have a child who isn’t too terribly attached to material things.  However, this same child may also be living in ignorant bliss about the important role that he plays in the family’s financial situation.

Either way you handle it, there’s a pretty decent chance that you have a teenager that acts like money really does grow on trees.

Teen learning lesson about saving versus spending money

I would like to think that I don’t spoil her.  But how can I get her to understand the value of money?

Your teenager’s comprehension of how or why she should understand the value of money is a LEARNED skill and for many people does not come naturally.  You may have made her sit through carefully thought-out lectures in a futile attempt to educate her on the importance of saving and spending.  The problem is that lectures don’t work, neither does arguing or yelling.

He sees how hard I work.  Isn’t that enough of a lesson?  You have to work hard to get what you want!

I believe in that philosophy and it’s a great one to have!  Yes, you have to work hard to get what you want in life.  However, the only person learning that lesson is the one who is doing the work.  If you want to get into your dream university, you have to work hard to get the grades.  If you want to conquer the next level of your favorite video game, you have to work hard at developing your strategy.  If you want to be on the varsity swim team, you have to work hard to prove your skill.  If your child wants you to buy him expensive things, then he should work hard to demonstrate that he understands and appreciate the value of money.

If you are raising a teenager, that kid should be earning an allowance.  Notice that I used the word earning and not receiving.

ALLOWANCE?  How much are you talking about?

Again, you are not giving her money.  She is earning it.  How much exactly will be different for every family.  The best way to determine how much allowance your teen should be able to earn is by figuring out what you want her to be responsible for financially.

I generally recommend that teens should pay for anything fun or personal.  For example, your teen can be accountable for buying her own clothes, video games, make-up, music downloads, grabbing some tacos and going to the movies with friends, etc.  Every teen is unique in her abilities to handle these expectations, so be sure to tailor the monetary responsibility according to her maturity level.  If you’re still unsure, start small and let it evolve over time.  You don’t need to have your teenager pay for ALL things fun and personal.  Choose two to three things to start with (e.g. video games, music downloads and clothing accessories), and then you can add slowly from there in relation to the raises that she earns.

She should not have to pay for everything, like she’s your tenant.  This would quickly result in resentment and failure.  Things like eating food at home, toothpaste, school supplies and other essentials are up to you to provide.  Once you both agree on her fiscal obligations, it will be easier for you to come up with a realistic amount that is fair.  The key to getting your teen to comprehend the value of money through the use of allowance is to allow it to present her with some tough financial choices.

Hmmm… How is making him pay for his $15 movie ticket going to get him to understand the value of a $300 iPhone?

Helping your kid to understand how money works is a step-by-step process.  The goal is NOT to make him keep track of the cost of every bite of cereal he eats or to get him to understand the weight you may feel on your shoulders from your home mortgage.  These early lessons are about taking small steps towards gaining financial savvy… one lesson at a time.  When it comes to understanding things like cash flow, savings, living beyond your means, debt, interest, etc. then there is no greater lesson than feeling the effects of his poorly thought out financial choices.

By letting him save his own money in order to go to the movies, he is being exposed to the basic idea that working hard and saving for something he wants is worth the effort.  Stashing away some money each week for a $300 iPhone is not a baby step and may seem unattainable at first.  Giving your kid the opportunity to save money to go to a $15 movie is more within his reach and helps to set him up for success in the long run.  Soon he will use these tools to know how to save for larger, more meaningful things.

Whatever amount you decide on for allowance, it should be just enough that he can actually utilize it, but it will also take some careful planning on his part.  It’s important that he is able to earn enough to use each week but also need to save some of it for future use.  For example, a great financial lesson at thirteen is,

Should I spend the rest of this week’s allowance on going to the movies with friends, or save that money so I have enough to go to Universal Studios next weekend?  I can’t do both.

Wait a minute, that’s a lot for a kid to handle.  Can a thirteen year old really make good financial decisions?

Yes, some actually do, but most won’t.  That’s okay; you want your teen to make some knucklehead purchases with her money.  So your little fashion queen wants to blow all her cash on a pair of $200 designer jeans… that are dry-clean only!  The lesson happens afterward when she realizes there’s no funds left for that movie she really wants to see.  Or what happens when she lazily skips the dry-clean-only instructions and throws it in the washer to save a few bucks?  Her money.  Her choice.  Her mistake.  DO NOT TRY TO FIX THIS!!!

That one experience will teach her more about the value of a dollar beyond anything you could ever say or do.  Like most people, the only way she’s going to learn is the hard way… trial and error.

Everyone reading this article has had their share of poorly planned purchases.  We’ve all wasted money and regretted it.  Those experiences have helped us grow to be wiser and become more discerning shoppers.  Would you rather have your kid learn that lesson at thirteen or thirty years old?  Additionally, it’s much less detrimental to learn that lesson over a $200 pair of jeans.  A harder lesson to recover from would be getting a $50,000 auto loan for a car that she can’t afford when she’s twenty-one years old or using her newly acquired credit card to pay for Spring Break vacation with her girlfriends.  Frittering away her money as a teen helps her make necessary mistakes to learn from without it destroying her credit score or risk eviction from her home.  This is a valuable lesson to learn BEFORE she gets inundated with enticing credit card offers in the not-so-distant future.

I can see how this is going to turn out already!  He’s going to blast through his allowance in a day and then beg me to lend him more money that we both know he’ll never pay back.  If I don’t give it to him, he’ll accuse me of being the worst parent in the world and I’ll feel awful!  What then?

You take a deep breath to calm yourself.  Then, put your arm around his shoulders and let him know in all sincerity that you know what he’s going through.  Perhaps you have a story you can share with him about how you’ve had to deal with the same type of situation where you’ve spent money that you wish you hadn’t.  Make it clear how those choices prevented you from using that money towards something else that you really needed at the time.  When you open up about stories of your past mistakes, you are sharing a more relatable, human side of yourself allowing your teen to feel your empathy.  In addition, you also want to demonstrate what it means to recover from a mistake and persevere.

Money mistakes are common, inevitable, and the quickest way to learn how to be more judicious with spending.  Instead of having a reaction that makes his choices seem idiotic or quickly drawing a line in the sand with a resounding, “NO!” compassionately ask your teenager:

I wonder what you would do differently if you could do it all over again? 

Play out all the different scenarios so your teen can clearly see the cause and effect of each choice.  This will help him to feel better prepared the next time he has to make a tough financial choice.  Chances are, between the two of you, you’ll come up with several different options that can inspire confidence in your teen about trying some of those options in the future.

How should I handle those financial “learning light bulb” moments without them turning into pointless arguments?

Try these tips:

  1. Instead of having a reaction that shows your disappointment, allow your teen the time to experience her own disappointment without your added judgment.  It’s likely that she already feels pretty lousy for not making a better choice.  Let that do the work.
  2. Be careful not to say that her choice was wrong but highlight her new power in knowing what to do next time.
  3. Remember to talk about any emotions that go along with the way she is spending her money.  For example: she continuously blows her money on swag from her favorite bands but can’t seem to have enough money for Saturday night.  Talk about what might be stopping her from thinking ahead.  Have a conversation with her about what she thinks would happen if she doesn’t buy the latest concert t-shirt.  What emotions are driving her choices?  And how can she learn to better navigate them?  (This one requires a lot of maturity, but only with practice will she be able to make more rational choices on her own).
  4. Be comforting and understanding toward her disappointment, but still hold your ground that you will not be giving her anymore money until the next agreed upon earning period.

He’ll never accept that!  He’s going to explode on me, storm off to his room, slam the door and give me the evil eye for a week!

Perhaps he will.  Be wary of falling into the trap of arguing about his conduct.  I know that behavior is inappropriate, but you can’t solve every problem at once.  If you can stay strong, grounded and calm, then after his self-imposed exile to his room, your son just might have the following thought:

If only I had done all my chores, I’d have enough money to do what I wanted.  Why did I waste all my money on those new sunglasses?  I already have two other pair!

Sounds too good to be true, I know!  But even half of that thought is a step in the right direction.  You WANT your kid to go through this kind of thought process.  And he won’t be able to go through it if you distract him with righteous admonishments toward his snotty attitude.  Your teen will instinctively try to lure you into a pointless argument, then spend all the rest of the week focused on how you are soooo mean and unfair in an unconscious attempt to avoid recognizing his own accountability.

Alright already!  How exactly do I structure an allowance system that helps my teen start respecting the all-mighty dollar?

That answer is in the February 2015 Blog Entry:  Allowance for Teens… Respecting the Almighty Dollar (Part 2).  I know, I know… cliffhangers can really test your patience.  However, there’s a great deal to wrap your head around in this article.  If you need time to digest what you’ve just read, go ahead and mull it over for a day or so, then discuss it with your spouse and perhaps other parents whom you know and trust.  Start coming up with some ideas.  Before you know it, you’ll be ready to read the second installment of Allowance for Teens… Respecting the Almighty Dollar!

(updated article from Janaury 2010)

Remember that adolescence is a temporary mental disorder and will pass within a few years.

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