Teenage milestones

Managing money
Most parents give their children a regular allowance, and many teens begin to manage their own spending and saving, especially if they obtain a part-time or summer job. How can parents help teens to become responsible and independent in money management? The best way to teach your children how to manage money is by involving them in some discussions of family spending and to give them a lot of freedom in handling their regular allowance. When establishing the amount of the allowance, have your teens make their case for a particular weekly or monthly amount by outlining their regular expenses, their savings for major expenses, and their discretionary spending.

It's important for teens to have some freedom in spending their allowance on entertainment, clothing, snacks, or whatever interests them. They will learn best from their own mistakes. If they run short of cash, don't bail them out. They must learn to budget for what they need as well as what they want. Show them how to look at different ways of allocating their money so that they learn money management. Over time, your teen must learn to take more responsibility for planning and controlling income and expenses for a greater number of personal and eventual household expenses.

When she's thirteen, her allowance might cover bus fare, lunch money, and entertainment. When she's sixteen, you might include in her monthly allowance the family budget for her clothing so that she learns to manage her money over a longer period of time. Remind her that you'll always be willing to provide money for situations that involve her health or personal safety. You don't want your daughter to accept a ride with someone who's been drinking because she doesn't have enough money for cab fare and has no other way home.

Bribery or incentive?
Should you tie allowances to household chores, school performance, and behaviour? No, unless you want your children to see money as either bribery or punishment. Family and school responsibilities should not be tied to money. However, experts suggest that it's OK to pay family members for doing chores and family projects that you usually pay a non-family member to do.

Decide together what tasks or projects deserve payment. These extra tasks may also provide an incentive for teens to learn how to handle tools or equipment they might not otherwise learn. By working with you on such tasks as painting and wallpapering inside the house or gardening and fence repairs outside, they also learn how to do the kind of family and household chores that relatives or neighbours would be willing to pay them for, once they see proof of the quality of their work. Most teens who want extra money are willing to mow lawns, to shovel snowy sidewalks, to deliver newspapers or flyers.

Saving and investing
You may not like your teens' taste in music or clothes, but respect their need to spend their money on what interests them. At the same time, through your example and guidance, help them understand the concepts of saving and investing and giving to others. If you haven't already done so, introduce your teen to standard banking practices, setting up a savings account for money received as gifts, from earnings, or perhaps as an allowance.

A healthy attitude about money includes saving for gifts and to give to charity. If your teen saves some of her allowance for charity, she should be allowed to choose the charity and see the benefits of her contributions. Talk about the volunteer work that you enjoy, and encourage your teens to get involved in causes that they care about.

If your teens need or want more money than their allowance can provide, help them find part-time and summer jobs, but watch to make sure that their salaried work doesn't interfere with their school performance or prevent their having a healthy social and personal life. More than twenty hours a week of part-time work is linked to decreased academic performance by teens. Try not to put your teen in a position where she works too many hours because she needs money just to cover the basics of her daily school and work life.

Encourage your teens who work part-time throughout the year or during the summer to save some of their money for major purchases or travel or for their post-secondary education. If, for example, your seventeen-year-old daughter wants to buy her own car or travel to Europe, you might offer to match whatever money she is able to save toward one of these goals.

If your teenagers are keen, you might get them interested in the concept of planning for their financial futures. Some teens become interested in ethical investment funds, others are intrigued by the stock market. Some high schools offer courses in commerce that include an introduction to investing and monitoring the performance of investments, whether real or paper.

Most kids are interested in how their parents earn money, and you may have been involved in career days at their schools or in take-your-child-to-work days over the years. Teens also show an increasing interest in different careers and in the potential earnings for different kinds and levels of work.

The financial facts of life should also be part of the education you offer them. What does it cost to run your house and what does your family spend in a year? If your children develop good financial habits and learn from you how to manage money well, they will be much better prepared to handle life on their own away from home, whether they're fully or only partially independent of your financial aid.

Budding entrepreneurs
If your teen shows an entrepreneurial bent, encourage her. She may be interested in structuring a small business around a part-time endeavour that brought her some spending money in the past — whether it's tutoring other students, writing software, troubleshooting for computer users, teaching tennis, or mowing lawns. You can help her assess the demand for her skills, and help her set up a more official business plan and structure. Undertaking this business, with all its successes and failures, will provide terrific experience for her career development and later entry into the full-time working world.

Of course, she will also learn how to develop both financial and personal independence, and in the current competitive job market, your teens may need to create their own jobs. They will benefit from learning how to identify business opportunities, how to network and market their skills, and how to negotiate satisfactory business arrangements. Although self-employment is a growing trend, industries and corporations also expect their permanent employees to be entrepreneurial in spirit as well as educated and skilled.

Learning how to earn and manage money is an important rite of passage. It can also be fun. Encourage your teens to enjoy not only spending, but making, saving, investing, and sharing money. Help them to put money in perspective as a means to an end, not the key to happiness.

Excerpted from Understanding Your Teen: Ages 13 to 19 by Christine Langlois. Copyright 1999 by Telemedia Communications Inc. Excerpted, with permission by Ballantine Books. All rights reserved. No part of this excerpt may be reproduced or reprinted without permission in writing from the publisher.