Parents play an important role in shaping their kids’ financial behaviour and attitude towards money. Many teenagers rely on their mum and dad to set the right example when it comes to managing finances.Of course it’s not always easy to talk to teenagers about money, particularly as they approach adulthood. Bearing that in mind, we’ve pinpointed three areas where you can help prepare your kids to navigate the tricky waters of personal finance.
1. Give teenagers financial responsibility
Sharing responsibilities with your kids
It is important that teenagers recognise the value of money and understand that it is not an unlimited resource.
Giving them the freedom to manage their own budget will teach them valuable lessons about:
- Only spending what they can afford, and
- Avoiding the pitfalls of unplanned expenses.
Pocket money and budgeting
For many people, pocket money is the first taste of financial responsibility.
Providing your teenager with a regular, set amount of money and the responsibility of paying for something they want gives them their first opportunity to practice how to stay within a budget.
Just over half of 15-17 year olds who receive money on an ad-hoc basis keep track of their income and spending. Whereas almost two in three of those who receive a regular, fixed sum are aware of their financial incomings and outgoings.
One way to get teenagers to take responsibility for their money is to give them a set budget for a specific task.
This could mean setting your son or daughter a monthly budget for their lunch.
If they take this money and spend it on clothes, or going out, then they’ll learn a valuable lesson when they find themselves stuck having to bring in sandwiches from home.
Part of teaching your teenagers how to manage their finances comes down to being strict with the money you give them and not bailing them out if they overspend.
Better they learn the hard way now while the amounts are small, rather than later when overspending can lead to problem debt.
Our research has shown that nearly eight in ten 15–17 year olds who cover unexpected mobile phone expenses from their own pocket say they keep track of their income and spending.
Just over half of those who turn to mum and dad to cover unexpected costs claim to keep an eye on their financial incomings and outgoings.
2. Set the right example
Learning from parents
When it comes to managing finances, many teenagers mimic their parents’ behaviour.
So if you’re the type of person who saves up to buy something, then it’s more likely that your kids will do the same.
If, on the other hand, you’re quick to turn to credit to fund non-essential purchases, your kids are likely to follow in your footsteps.
One way of setting the right example is by including your teenagers in some of your financial decisions, particularly as they reach their late teens.
This could include showing them how you shopped around for a better deal on your current account, or sitting down with our Budget planner tool to work out a monthly budget.
You can take this a step further and send them out to do some grocery shopping with a list and strict budget.
Just be careful you don’t end up with a kitchen full of sweets and crisps!
It’s also a good idea to be open with your kids about some of the financial mistakes you made when you were younger.
Sharing your tales of woe can be a good way to highlight the dangers of poor money management.
Whether this means telling them about the time you couldn’t afford to fix the fridge after it broke down, or how not getting your home insured cost you thousands after a burglary.
These are valuable lessons you can share.
Developing a savings habit
Learning about the importance of saving and only buying things which you can afford is an important part of adult life.
Whether this means encouraging your teenagers to put aside a small amount every week to buy new shoes, or longer-term planning for a larger purchase, leaning to save is a vital skill.
Without it, your kids might not be able to achieve their long term goals, such as:
- Buying a car
- Going to university, or
- Providing a home for their family.
It can be difficult to talk to teenagers about the need to save.
However, there are certain opportunities you can seize.
If, for example, your teenager is interested in taking driving lessons, this is a great time to sit down with them and work out how to meet the cost.
This might mean looking at how much needs to be put aside each month, or searching for a part time job.
Want to find out more about getting your kids into the savings habit? Read our guide to Savings accounts for children.
3. Help them manage their first wage
If your teenager is trying to save up for a large purchase, or simply wants some extra spending money, one option is to find a job.
Getting a job can be a teenager’s first step towards financial independence and can play a key role in preparing them for the future.
While many teenagers take on informal employment such as babysitting for family friends, anyone over the minimum school leaving age can work full time.
If your kid does get a first job, this will often result in an increase in the amount of cash available to them.
This is great opportunity to put some time aside and talk to them about the importance of saving.
This can be as simple as deciding to put aside a certain sum each month for a rainy day, or, if they have a set goal, helping them make sure they reach it.
For example, if your teenager would like to buy a car, you could show them how to set-up a Direct Debit to their savings account each pay day.
This will make saving automatic and make it easier for them to stick to their budget.
You can also help them understand their payslip and talk them through everything they need to know to make sure they’re signed up to the right bank account.
You could even direct them to our Car costs calculator, which will help them find out how much it costs to run a used car over a year.
Looking for money management tips for teenagers and young adults? Have a look at The Site’s Money Management Tips section, or in Young Scot’s Budgeting sectionopens in new window.
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Frugal living doesn’t have to be a life devoid of fun. In fact, you might be surprised how easy it is to trim your expenses with a little patience and planning. The more you can get out of every dollar you spend, the more money you will have to save for potential emergencies, a college education for your children, vacations to exotic locations, or whatever big ticket item your heart desires. To get you started, here are 7 ways to spend money wisely.Frugal living doesn’t have to be a life devoid of fun. In fact, you might be surprised how easy it is to trim your expenses with a little patience and planning. The more you can get out of every dollar you spend, the more money you will have to save for potential emergencies, a college education for your children, vacations to exotic locations, or whatever big ticket item your heart desires. To get you started, here are 7 ways to spend money wisely.
1. Pony up for quality where it counts.
The cheapest option isn’t always the best option. What’s the point of buying a cheap pair of shoes if they’re just going to become worn out and rugged within a few months? It would be cheaper to pay $50 for an outfit that will be in good shape next year than $20 for an outfit that has to be replaced in less than 6 months.
2. Buy generic label groceries.
You would be hard-pressed to find any difference between name-brand and generic labels in the grocery store. Don’t believe me? Grab a bottle of a name-brand peanut butter and the generic grocery store variety and compare the ingredients. Repeat this exercise with things like canned vegetables, boxes of pasta, cleaning products, and medicine. When you purchase name-brands, you are not paying for the product itself, but rather the idea behind the product. In other words: name brands are more expensive because they have higher marketing budgets (not higher quality).
3. Cut down on food waste.
Answer honestly: if you had to guess, what percentage of the groceries you buy end up uneaten and tossed in the trash? According to a study by the Natural Resources Defense Center, the average American family of four throws away almost 50% of the food they purchase, resulting in an annual loss up to $2,275. To avoid grocery waste, change your thinking about shopping. Instead of making a list of items to purchase without thought process, plan ahead by writing down a weekly schedule of the specific meals you are going to cook before you go to the store. If it isn’t required in the ingredients you need, it doesn’t go in your cart. Make note of how much food gets tossed in the trash and cut the amount you purchase accordingly. If you’d like to save time and money, check out this essential resource on once a month cooking.
4. Wait for it…
Retail therapy is almost always a good idea, but smart shoppers know how to be patient. Why should you spend $100 on that gorgeous skirt now if it’s going to be marked down to make room for fall and winter clothes? Be patient and you will be rewarded with a steep price cut. Keep an eye out for the special offers that you can’t refuse.
5. Clip coupons for special occasions.
Dining out is one of my favorite date night activities, but it sure can empty a wallet fast. Restaurants are typically generous with their deals, so start clipping for serious cash savings. Wanna make coupon-clipping a fun and interesting game? Try this:
- Get an envelope and start collecting coupons
- Decide on a weekly date night
- Have a random drawing to determine where you go (it will always be a surprise!)
6. Go to the matinee.
Late night movies are so overrated. Why would you pay double the matinee ticket price just for the pleasure of combating a much larger crowd and struggling to find a seat in a packed auditorium? Go to the early show to save some dough and beat the crowd.
7. Hit up the thrift shop.
Consignment shops are full of deals on barely-used clothing that could save you tons of money on your wardrobe. If you have never considered thrift shopping because you’re afraid the quality won’t be up-to-par, give it a chance. The thrift shops in my neighborhood are quite picky about the items they accept, so I bet you just might be surprised.
Do you have any additional tips that will help people save some dough?
If you’re feeling cash-strapped, please don’t feel like you’re alone. I understand how you feel, and I’m willing to wager the overwhelming majority of people reading this share your pain. Do you have any tips that will help everybody spend money wisely? If so, please share them below because we could all benefit from your knowledge.