My kids call me “the king of deals.” It no longer surprises them when I come home with something that I got for next to nothing. Most recently it was the $1500 living room suite that I got for $300. Its not always something as big as this. Many times its as simple as six boxes of pasta I got for free or .99 dry cleaning.
We live in a culture that doesn’t value financial responsibility. From our school and churches to government and personal lives we spend what we don’t have. Unfortunately, we are passing down our patterns of overspending to the next generation.
More than 30% of High School students have their own credit card, but very few of them have ever under gone any educating in how to use money wisely. The first step of course would be to get rid of their credit card. Everyday teens make financial choices that could do serious harm to their financial future. Students are graduating college with an average of $30,000 in school debt and more than $3000 in credit card debt. Instead of leaving school in launching into their dream career, they are saddled with crippling debt.
Helping your child learn financial responsibility starts young and involves simple purchases. Here are a few steps to help your teen make financially responsible decisions.
Have Some Skin in the Game:
Don’t buy big items for your teenager without making them pay part. Depending on your income level, the idea of having your child pay for part of a purchase may sound absurd. There are two principles of finance you teach your child by making them pay for part of a purchase. The first principle is The Greater the Investment, the Greater the Worth. There is an implied value when you ask someone to pay for something instead of giving it away. There is a greater appreciation for the item as well.
The second principle is Ownership Equals Responsibility. The things we own we tend to take greater care of. When you teenager has to pay $250 of his own money toward his new XBox One not only will he appreciate it more but he is more likely to take care of it as well.
Determine Wants Versus Needs:
When your teens expresses the desire to buy something, have them decide if this is something they have to have or simply a luxury they want. All wants aren’t bad or frivolous but they all have a price. For our children we established a two week cooling off period before any major purchases. During that time they have to figure out: 1. Why do I want this? 2. How will I use this? 3. How will this benefit me? In the end the answer may be as simple as “because I think it will be fun,” but I’ve at least made them weigh their decision.
Compare Apples to Oranges
If they have decided that they still want to spend their own money on that fancy new smartphone,teach them how to comparison shop. Help them do research online and talk to friends to see if this is a wise purchase. A side benefit to comparison shopping is that because of the time investment, many times you
lose interest in the item itself. We saw this happen often when our children were young. My son would want to immediately spend his birthday bounty on the latest gadget his friends had. I would make him take two weeks to compare pricing online and in newspaper ads and read some reviews of others that have the device. Often after the two weeks he would decide he it was no longer worth the investment.
Enjoy a Little Delayed Gratification
After deciding that a particular purchase is worth it, the last question they should ask is, “Even if it is the right purchase, is it the right time?” Sometimes waiting a while longer can get a better price or even a chance in mind. Give them a “purchase pause” before moving forward. Require a two week to one month pause before giving them the green light to make the purchase. You aren’t saying ‘No” but rather “not yet.”
Stick to a Budget
If your teenager has regular income then it’s time for them to have a regular budget. I remember getting my first paycheck in high school and immediately heading to the mall to blow it all. You better believe I had buyer’s remorse the next day. Everything I earned was gone in a day. One of the hardest things for teenager’s to do with their money is learn to spread it out and save a little.
Have your teenager keep receipts for everything (EVERYTHING) they spend their money on for three months. Sit down with them and categorize the receipts such as entertainment, clothing, school, job expense, etc. This simple exercise will help them see where their money is going.
Create a Generous Heart
It is important that your child understand that everything they have is a gift from God. Instill in them the value of giving away a portion of what they earn. This could come in the form of giving to their local church, supporting a child through Compassion International, or helping raise funds for a cause.
From the time our childen were little, each Christmas we would purchase gifts for children through Samaritan’s Purse. My wife and I would each purchase a big item such as a goat for a family. Then our five and seven year old would each purchase with their own money a blanket or bible for a child. This simple repeated act has created a desire for generosity into their teen years. They are able to hold a little looser to their “stuff.”
The best way for your child to learn financial responsibility is to learn from you. Share with them some of your successes and failures over the years. Include them in discussions about major financial decisions for your family. What are some other ideas you have or lessons you’ve taught your children about finances? Leave your advice for others in the comments.