Friday, February 14, 2014

Raising a Financially Savvy Teen

I'm a huge fan of teaching kids how to manage their finances long before they get their first job. They need to understand how to make money stretch, and how to keep track of the invisible money in a bank account.

Early financial education is the only way we are going to raise a generation of financially savvy kids.

Maddy has always had pocket money, and she has always had certain expenses to go with it. As far back as

Kinder she knew that if she wanted canteen money, or money for school fundraisers, she needed to use her 50 cents. When she started high school last year, we increased her pocket money significantly to $25 per fortnight, but also increased the expected expenses.

Madeleine is now responsible for buying all her own clothes, as well as any birthday gifts for her friends. We will still buy her school and dance wear, as well as underwear, but anything other than the basics are up to her to buy.

This has been a great learning curve, and it is more than obvious that it is not over. She has very quickly adopted Kmart as her store of choice for clothes and shoes, being disgusted by the idea of spending an entire fortnights pay on just 1 top at the boutique stores. Following her first birthday party invitation of the year, she also downgraded her idea of an acceptable present from a CD + poster book costing over $50, to a set of nail polishes and a poster, generally coming in at $20. She is slowly but surely appreciating the intrinsic value of her belongings more, realising just how much everything costs.

As part of the upgrade to a higher amount of pocket money, we also opened her her first ATM card account. Despite her protests, we pay her pocket money straight to the account, and she is expected to withdraw cash from an ATM, or use the card at EFTpos terminals. Balancing invisible money is a skill many adults don't have, and those that do take it for granted.

In the very early days, before she really embraced the ATM machine as her friend, the pocket was adding up. And adding up. Eventually she had $150 in her account, and had been complaining that she needed new shoes. I took her shopping, and repeated the lessons on using the various machines, and this time the lesson stuck. She was hooked. I kept an eye on the account online, but didn't say anything. I just watched as the balance went down. And down. And down. The week I finally saw a declined ATM withdrawal on the account, I innocently asked her if she wanted to go shopping for a new winter jacket. After all, she had by far outgrown the old one, and of course she should have plenty of money in the bank.

She had to admit with very guilty eyes that she couldn't take any more money out of her account. That she had been spending all of it on junk at the canteen. I knew she was waiting for a punishment, for me to get angry. But I didn't. 

We sat down and went over her bank statement together. How much had she spent exactly buying treats at the canteen for herself and her friends. She was horrified to realise the amount added up to over $150. Somehow it had all spent so quickly and easily, using the ATM card made it seem like it was free, never ending money.

She had spent the amount of a gold pass to Wet n Wild. A significant amount of the cost of a second hand iPhone. More than the amount needed for Converse sneaker, a simple Pandora bracelet, 10 trips to the movies, all things she had hoped to save up and use her money for.

Why on earth would I need to set a punishment or be angry about this life lesson? The empty bank account was consequence enough. She has never again been able to accumulate such a significant amount without the help of birthday or Christmas presents. She has also never since blown so much money on junk food. She had to go without a new winter jacket until August, and I let it happen. She wore her old, far too small jackets and cardigans (thanks to a massive 12 year old growth spurt), and raged about it. Angry at herself (although I got the benefit) for not being able to have something nice and new as a result of her mistakes.

There is no point giving a teen access to money if there isn't responsibility attached to it. These are not lessons you want them to learn when they get their first full time job and take out a car loan. Far better that they learn the lessons when the worst consequence is not having access to desirable new toys, instead of basic necessities.

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  1. I love the way you handled this. As a parent it can be hard to let go and allow our kids to make their own mistakes AND deal with the consequences of that but it is so important. I'm not even at the pocket money stage yet but great inspiration for the future :-)

  2. LOVE this post! My oldest is only 8, but it's taken me this long to start her school bank account. Pocket money, until now, has been sporadic and immediately spent at the $2 shop. She has no clue the value of money or earning the things she wants. You've given me some amazing tips and ideas. Hopefully I can start her early on saving her pocket money and earning the treats she wants. Fingers crossed!


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