Enhancing Your Teen’s Money-Management Mindset

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Many teens could benefit from a better relationship with money despite earning money to spend what they earn on their desires. It is beneficial to facilitate  teens’ love of Having money versus their love of Spending money.

Assisting your teen with opening a checking and savings account is a good first step. You may consider contributing $100 most banks require to open your teen’s accounts. Secondly, suggesting to your teen that the savings account is really an “Honoring of ME” account with 10% of every dollar earned going into this savings or “Honoring of ME” account. Emphasis is placed on the value that your teen pays herself first. While money from this account may be withdrawn in an emergency, withdrawals should be paid back to the account with priority.

This account should not be set up with your teen thinking that she can always withdraw from this account because that view defeats the purpose of learning to enjoy Having money. Instead, your teen may improve her savings by considering this account as serving to honor her. This account is for her to have money and enjoy its growth. With this message, I believe your teen may think more thoughtfully before withdrawing money from her “Honoring of ME” account. My experience is that once they own an account that is theirs and see it grow, they get hooked on saving what they can, rather than spending whatever they have. It is a psychological game that helps them in a mindset of thrift and self-control.

Assisting your teen with developing a budget for her money may not only reduce expenditures and increase her savings, but also offer her the opportunity to be truthful about her priorities and enhance her accountability. Demonstrating how to budget money is the second step and it is important to note that, ultimately, she is in control of her choices. Your purpose, as a parent, is to set her up for success and allow her to choose and learn. The message with budget development isn’t to emphasize limitation or depriving oneself to reduce expenditures; rather it is to assist your teen with becoming more aware of her priorities and how to manage them.

For instance, if she chooses to spend her money on daily coffee drinks at Starbucks and complains that she really desires that expensive outfit and can’t afford it, ask her this question, “Is it that you can’t afford the outfit or that Starbucks is more of a spending priority?” Whatever is showing up tends to be our priority or it wouldn’t be showing up in our lives. This question allows your teen to become more aware of her choices and priorities. With greater awareness and honesty, she has greater freedom to choose differently. A budget allows her to visualize her priorities. Once being aware of her priorities and acknowledging her choices (without shame or guilt attached), her sense of accountability with money management may increase rapidly.

In my point of view, a parent and teen discussion about debt and credit cards is imperative. Once your teen turns 18, it is highly likely that she will receive invitations to a line of credit from various credit card issuers. The offers may be very attractive to young adults earning a nominal income. According to a 2015 report by “Money,” the average debt for Americans between the ages of 18 and 65 was $4,717.

Creditcards.com stated that the average credit card interest rate was 15%. If only paying the minimum amount due each month, it would take 10 years to pay off the $4717 at the 15% interest rate and the total profit to the credit card company would be approximately $18,000. Informing your teen about how credit cards work may prevent them from being blindsided by the credit card offers. Additionally, informing your teen that establishing credit has some merit, it works best when she only uses the credit card as a convenience and stays within the limit of what she can pay in full each month. This will only benefit her in the long run by minimizing excessive spending and money leaks in interest and fees.

One final step to empower your teen with smart money-management habits is to not bail your teen out of a financial challenge. Most of us desire to facilitate our teen’s success in every area of life; however, when we rescue her from the consequences of a poor choice, we are disempowering her and thus, doing her a disservice in the long run. Choices are opportunities for your teen to learn greater awareness as to what works and what doesn’t work for her. If a choice didn’t yield the results she desired and she is not bailed out from a parent, she is forced to consider other choices/options to remedy the situation.

These options may not otherwise be considered because with a “Bail Out,” your teen doesn’t need to seek an alternative choice. If the resolution to the problem is a priority for your teen, she will find a solution and she can own that she, not her parents, resolved the problematic circumstance. She is in control of making the necessary changes to create the results she does desire. Acknowledging her responsibility sends the message that you believe in her potency to make the necessary changes. Guidance is beneficial in this process, and again, allowance for your teen to be in control of her choices. In my perspective, when parents remedy the situation for the teen, the message is sent that she is not powerful enough, intelligent enough, or insert any message of “not enough” to take control with action to create her desired results.

An “Honoring of ME” account, budgeting, information concerning debt and credit cards, and allowing your teen to resolve money management dilemmas with guidance and not a parental “Fix it” perspective are steps on the journey of your teen having a healthy relationship with money. When your teen has learned money management skills and feels empowered with handling their money well, they are set to create more money in their life with wiser choices, better habits, and greater awareness of opportunities to increase their income. On this money-management path, your teen also gains more resilience to life’s challenges, independence, and accountability.