Archive for Tuesday, November 8, 2005

Double Take: Teaching kids to manage money gives them a taste of adulthood

November 8, 2005


Marissa: This week we'll discuss how much control parents should have over what their children spend their own money on. As with so many topics, this question can be answered differently depending on the situation. I think a main factor should be whether the money is coming from an allowance or the child is making it from a job.

To start off, I have a little bit of a problem with a "free" allowance. There should be requirements to receive it. An example of this is a list of weekly chores. If the chores are not done, then the children should not get an allowance. Starting this system at an early age can help your children understand what the process is like in the real world.

However, if your children are making money on their own, then the amount of control you have is lessened - assuming, of course, they are not using the money to buy illegal items. The extra freedom that comes with earning money can be a reward for their hard work. If they are too confined in how they can spend their money, they could lose motivation to keep their job.

Regardless of where the money is coming from, you should always encourage your children to save. Some parents even set a required percent of a paycheck to be deposited. This is extremely beneficial, and your children will appreciate it once graduation rolls around and they realize the cost of living is quite expensive. I think too many students are unaware of the benefits of saving and don't take it seriously.

Another really important factor is to help your children determine the difference between needing and wanting. Unfortunately, brand-name clothing is all the rage. For some families, spending $100 dollars on a single pair of jeans isn't a problem, but for others it's nearly impossible. Though right now your children's existence might seem to hang on whether they have "Abercrombie" inscribed on their pants, setting limits is important. If your children still insist on clothes that are more expensive than you're willing to spend, tell them you will only pay so much and the difference will have to be paid by them. Once it becomes their money that they are throwing away, they may change their tune.

Instilling good spending habits, required savings and limits in your children are all essential life skills for their future.

Wes: It is my opinion that adolescent life should be sort of a mock-up of adult life. By this I mean that parents should encourage kids to interact with and explore the world like maturing young adults rather than overgrown children. We've discuss this idea in terms of dating, sex, substance abuse and school life, and it is every bit as true with money. In fact, money is a very safe and reasonable mechanism for teaching good, young-adult habits, and it comes without all the baggage of sex and drugs that seem to trip up communication so easily.

As Marissa notes, parents should use every monetary transaction to create situations that mimic the "real world." For example, adults are not told how to spend their money by their employer or the government (except for taxes, which kids pay, too).

So parents should not routinely direct their kids on how to spend their money - earned, gifted or offered as allowance. Instead, parents should offer sensible advice on how to become a good consumer. The list of those tidbits is a mile long, and there are many good books on the topic. For starters, parents should encourage careful use of credit, perhaps by making small loans to their kids and then being sure they are paid back. If not, no more credit.

Parents should encourage kids to read Consumer Reports before buying a car, iPod, computer or any other expensive item so they become value shoppers. Parents are also free to offer advice on wise purchases and financial planning, as long as they do not sit around waiting for it to kick in and then feel angry when it doesn't. Much of the advice given in adolescence only pays off later. So patience is a virtue and nagging is not.

All this leads us to the inescapable conclusion that when we treat money in this way, something interesting will happen: Kids will make mistakes. Some of them will be costly. This is how they learn, and we can be happy that, in this case, it's only money. However, if you adopt this philosophy of "buyer beware," you cannot bail the young person out of a bad expenditure or cash shortage. If an allowance or salary system is given and the young person exceeds their budget, the only way out should be the same one we face as adults: a short-term loan or the inability to spend what they don't have. The exception is in cases where you agree that your teen did everything they could to avoid a bad outcome. For example, your daughter does her research and purchases a car that ends up needing a transmission - and the mechanic is as surprised as she is. I suggest that you help her out of this terrible predicament. However, if your son, against everyone's advice, buys a 1983 Camaro with 197,000 miles on it and is shocked when it ends up on blocks in your front yard, I think the best you should offer is a loan - or a tow to the salvage yard.

Bottom line: Money is not about power in adolescence. It is about learning. It can be a great tool or the cause of many fights. I'd go with the first alternative.

Next week: What should parents take away as a consequence for bad teen behavior, and what should they leave alone?

- Dr. Wes Crenshaw is a board-certified family psychologist and director of the Family Therapy Institute Midwest. Marissa Ballard is a Lawrence High School senior. Opinions and advice given here are not meant as a substitute for psychological evaluation or therapy services. Send your questions about adolescent issues to All correspondence is strictly confidential.


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