Learning the Value of Money

When it comes to teaching teens about money, it is often viewed as a problem that is “too hard”. Yet , it is difficult to imagine a skill more important than proper money management in an era when credit card spending on ‘branded’ products is pitched directly at teens.

Schools may teach mathematics and accounting, but the practical aspects of managing an escalating mobile phone bill can seem completely at odds from these traditional topics.

Alongside this, with ‘hole-in-the wall’ banking and the increase in online transactions it seems that methods of monetary transaction have become more and more impersonal. This means that opportunities for teens to learn through personal interaction have diminished.

The task of bridging the gap between everyday money matters and a school’s curriculum falls to parents and, while talking with teenagers can be a difficult exercise at the best of times, finding interesting ways to pass on practical monetary advice is vital.

Some novel ways that you might be able to develop good budgeting and sensible money habits in your teenage children include:

Jobs for the Boys and Girls

Pocket money is a popular way that parents choose to introduce their children to managing money. This option expands on the idea.

First, draw up a contract between yourself and your teen. The contract should spell out what chores and behaviours will entitle them to their fortnightly pocket money, and detail what expenses their pocket money should cover i.e. school lunches etc.

Agreeing (and signing) the contract will also provide an introduction to workplace relations later in life. As an addendum to the contract, a list of jobs can be added to earn extra payment.

This might include washing windows, weeding the garden or cleaning the house gutters. Tasks would be priced according to their difficulty. Incentives could also be offered, such as bonus payments for completing three additional tasks.

The Banker and the Insurer

As a parent, it is likely that you’re often placed in the position of ‘banker’. Teens aren’t usually backwards in asking parents for money, so you will need a consistent strategy to deal with what can become endless requests.

If you have a formal pocket money agreement you can effectively operate as a banker. Taking this further, loans can be taken and interest can even accumulate (eg, instead of simply washing your car, polishing may also be required in order to access funds early). And, although it might not be something they choose, you can also offer your teen an ‘insurance policy’.

In this case, insurance could be offered as an optional part of the ‘pocket money agreement’. This would see jobs paid at a 5 per cent discount so that, in the event of illness or accident preventing them completing the contract, the base payment could still be paid.

Teens in Charge (for a week)

One of the best ways to learn is by taking responsibility. Putting teens in charge of the household budget for a week might seem like a risky option but there is nothing like necessity to spur on an education.

So, rather than them coming to you for money requests, they have to allocate funds for all household spending. This means they have to put aside money for all utilities during the period; budget for family meals; and other necessities.

They can also control the entertainment allowance (although you’d obviously still want to maintain a power of veto over what it was used for).

Money Markets

Investing is another valuable skill that teens could be encouraged to acquire. As a family you could play the stock market with an imaginary amount of money.

Together you could choose shares and watch how they grow or fall in value over a month or quarter. This could help teens learn the value and risks of investing. There are a number of these types of educational investment games that can be found on the internet.

The emphasis of all of these ideas is to actively encourage and provide support for teens to manage their money so that they can successfully do so in the future.