Notes on Parenting

Insights for parenting babies, toddlers, teens, and young adults.

Thursday, January 10, 2013

Teaching Your Teen to Handle Money

Most kids are familiar with how money works well before they reach the age of 10, some at half that age. You give it to someone in exchange for stuff that you want. Hooray! Stuff! The problem is that children, teens, and sometimes adults never really make the connection that money is just a symbolic representation of completed work. You work, and you convert that work for someone else’s work, whether that is the stuff they made at work or the service that they offer. At the end of the day you essentially gave whoever you’re buying something from a part of your workday in exchange for theirs. But what does that have to do with teaching your kids about money? Well…

Make Your Teen Get a Job

A lot of parents feel bad about making their kids work, especially if they don’t really need to, after all you’ve been paying for their stuff for years, you can probably afford to do it a few more years. The important thing to understand is that the job isn’t to take the financial pressure off of you as a parent (though that can be a factor), it’s also to teach your teen about how money really works. Remember however that this job however should not get in the way of their schooling, so be careful here! We cannot in fairness expect someone to understand what money is if they’ve never been exposed to the full process of its circulation. If your money just comes out of nowhere and you spend it for stuff, you will become used to the idea that money is free and by extension so is stuff. Simply telling someone that this isn’t true is about as ineffective as telling someone that war is scary when they’ve never even been in a fistfight. Knowing and understanding are very different. At the end of the day it takes understanding to drive behavior.

Make Your Teen Think About The Hours to Stuff Ratio

If your teen really wants a car (let’s be honest, your teen does want a car), have them sit down with a piece of paper and work out what it costs. Have them take their hourly wage from their new job that they just got, then make them subtract Uncle Sam’s blood money, and then divide it into the cost of whatever vehicle they have their eye on. They’ll probably assume 20 hours per week and multiply 8*20=160 dollars minus 20% taxes comes out to about $130 per week and $520 per month. By this point they’ll probably be pretty excited because that means they can afford a relatively decent used vehicle in about half a year, less if they’re impatient and finance it.

At this point you can out that they’ll be paying about $100 a month in gas, and about $70-80 a month in car insurance (teenagers cost more). Then have them figure in the cost of going on dates and paying for the activities that the vehicle is supposed to get them to in the first place and they’re down to about $250 per month left for surplus after the vehicle is paid off which can easily be swallowed up by car repairs and paying ever increasing dues on extra-curricular activities at school. Get them to understand that there is a direct correlation between the 80 hours a month that they spend at work every month and the stuff they spend their money on.

Thinking about Taxes

You should also take the time to help your teen understand how taxes and tax returns work. There are many software packages as well that you could teach them to use, such as Turbo Tax which has several different editions depending on your needs, such as military taxes, student taxes, etc.

The Results

The result of going through this kind of exercise is that your kid will develop an appreciation for just how much work is required to have the stuff that we use every day. Besides helping them develop an appreciation for having a job at all it will greatly limit their desire to spend money on pointless stuff as well as making them more appreciative of all the money you as a parent have been blowing on them their entire lives. Though you’ll have given them a good leg up on growing up the real kicker won’t come even then until they move out and they realize just how much work it takes to keep a roof over their heads and the lights on.

Alan Brady is a passionate blogger who spends his time researching and writing about the economy, recent job market trends and business. He is currently writing for the employment lawyers locator,

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