How much control do you let your children have over their money? Parents, it turns out, are pretty evenly split on the topic. According to MMI's Kids and Money Survey, 49 percent of parents say that they give their children either complete or majority control when it comes to what they do with their money. Conversely, the remaining 51 percent of parents prefer to they give their kids limited control (as long as they don't spend the money on something foolish) or no control at all (simply putting the money into savings instead).
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!
This is an updated version of an article that originally appeared in 2010.