Teenagers want three things, according to parenting expert Mark Gregston, “To make decisions about themselves, to feel like they’re in control, and to have opportunities to prove their maturity and to show you that they can do it.”
For parents, the good news is that giving them those three things can make them better with money as adults. Teaching kids about finances is best done through experience. The lessons can be like getting a learner’s permit (with adult guidance) before getting a driver’s license (with complete control over the vehicle).
Parents who give their kids control over a portion of their money — and guide them in their decision-making — raise teens who are better prepared for the world. Here are some ideas for giving teens a framework for making money decisions.
- Use the “hours worked formula” to gauge whether a purchase is a worth it or not.
Make the connection between what your teenager wants and the number of hours they’d have to work to pay for it. For example, teens can take the hourly wage for their part-time job or babysitting gig and divide that wage into the item they want.
Babysitting = $10 per hour
Designer jeans = $150
Hours worked to buy the jeans = 15
Ask: Are these jeans worth working three or four babysitting jobs to pay for them? If yes, put your cash aside and save up for them.
If not, drop the idea completely and wear what you already have or look for less expensive alternatives.
Lesson learned: You can get what you want if you work for it. Sometimes, though, it’s better to hold on to your money to spend on other things.
- Figure out what to spend money on to get the maximum value.
For most people, money is finite. The key is to make the most of what you have to spend.
For example, teach your teen to build a capsule wardrobe to help them get the most of what they already own and determine what new pieces of clothing would be most useful. Here’s the concept: Build outfits around central pieces of clothing you already have in your closet that go together.
Then, when your teen spends money on a new piece or accessory, they can make sure it fits in the capsule. If it doesn’t, they shouldn’t buy it. They may find that they have what they need in their closet already.
Lesson learned: You often don’t really “need” much. The choices you are contemplating are “wants.” Know the difference.
- Know how to bring in extra money.
Teens can learn a marketable skill and then use it to bring in extra money. For example, if your teen has a lovely voice, they can sing at weddings. If they play guitar, they can teach beginners. If they are a tech wizard, they can charge a fee to be “tech support” for neighbors and parents’ friends. They can train dogs and their owners. They can address wedding invitation envelopes with their beautiful calligraphy.
Having marketable skills that pay cash helps teens gain confidence and bring in extra income. Be sure to work with your teen to save at least half of their income from hobbies.
Lesson learned: Turn hobbies into a side hustle to earn extra income.
- Get paid extra with value services.
Your teen should leverage their talents to get paid a higher wage. They can often earn extra income for what they are already doing by adding additional value.
For example, a friend of mine in Los Angeles was a bikini model, which is a job geared toward young women. She learned how to do makeup, too. She’d go on photo shoots and work double duty as a model and makeup artist, but also get paid double. She worked harder than the other women, but came home with double the funds.
Your musical kid can babysit and give guitar lessons at the same time and ask for a slightly higher wage. Your barista can make coffee and contract separately with the owner to paint the window displays, too. Your crafter could make special holiday decorations the owner of the shop where they work sells during the holidays. Help your teen to increase the value they give their clients or employer so they can make more money.
Lesson learned: We all have a variety of marketable skills, use yours to increase your opportunities and your wage.
- Spend where it counts and save where it doesn’t matter.
Start with some math. If your family eats out three nights a week, as busy families often do, consider eating out once a week instead and eating home-cooked meals and leftovers the other days. See how much you’d save.
Teach your teenager to cook and put him in charge of cooking for the family once a week. Then put aside the extra savings in a jar and let the teenager be in control of what the family does with the money — movie night for all, gifts, or purchasing something, as long as it’s for the family. They get the “credit” for saving.
This concept applies to lunches, fuel for your car, entertainment, and a plethora of other instances where we spend money, too!
Lesson: Spend on what is important, not just on what is most convenient.
The teenage years can be tough, as your children start to become more independent. When it comes to managing their money, give them more and more control until they are out of the house. Hopefully, by then, they will be ready to make more smart money decisions than poor ones.
Strategy is everything.
If you started saving late, you need more than just a 401(k) to fund your retirement.
7 Retirement Lessons For Late Starters