Parents were almost evenly split when asked whether they let their children have control over the money they receive (from allowance, gifts, etc.). According to MMI's recent Kids and Money Survey, 49 percent of parents say that they either give their children the total decision or most of the decision when it comes to what they do with their money. On the other hand, 51 percent of parents say they give their kids some say (as long as they don't spend the money on something foolish) or put the money into savings.
While it's important for parents to set boundaries and expectation for how teens are to spend their money, it is also important to empower teens to make wise financial choices on their own. Following are four ideas for raising teens that are financially independent and successful.
1. Wants and needs – there is a difference. Your teen may make a very convincing argument for why they think they need a brand new convertible when they first get their license, but you know better. A new car is a want, not a need. Our financial auto calculators may illuminate the financial ramifications of a need purchase versus a want purchase
2. Life comes with a BIG price tag. Help teens learn how to make smart purchase decisions and work with a budget. For example, give them the freedom to pick their own clothes when back-to-school shopping, but set a limit on how much they can spend. This allows teens to express themselves through their fashion choices, while also encouraging them to live within their means.
3. Problem solving. Ever heard someone diminish a teen’s problem with the phrase, “Well, in the real world…”? Don’t let that person be you! Sure, teenage problems may seem juvenile and petty at times, but they are still real problems to the teen involved. Give teens the opportunity to resolve problems on their own before you jump in with a solution, this will increase their confidence that they can weather any storm (including financial) and come out okay.
4. Teach them to be responsible for their actions. The teen years are not about making all the right choices, rather, the teen years are about realizing that all actions, whether good or bad, have consequences. If your teen makes an error in judgment that results in a speeding ticket, for example, let them pay the consequences, whether by paying the fine or taking a defensive driving course.
Do you have any tried and true lessons that helped your teen become a financially responsible adult? Leave a comment and let us know!