Q: My teenager has been working for several months but seems to spend his money as fast as he can earn it. I'm worried that he's blowing everything on useless items. What can I suggest to him so that he learns how to budget and save?
A: Many parents envy your situation—a teenager who works and earns his own spending money. Helping him learn how to manage his money is an equally important aspect of his financial independence. Here are things to consider when you speak to him:
- Set a time to share your concerns with him. Prepare to hear his responses, even if you don't agree with what he is telling you.
- Understand that the way you do things might not be his way of doing things. Your goal shouldn't be to get him to do it your way, but to help him find a way to be successful that works for him.
- He is spending his money in ways that get him what he wants: status with his peers, recognition of his identity, acceptance in his community, independence and separation from his family. He's unlikely to give all of this up so helping him find other ways to meet his goals needs to be part of his financial plan.
Here are tips to get him started:
- Have at least two bank accounts, one for savings and the other for weekly spending.
- Lower the limit on his debit card and make savings accounts harder to access.
- Develop strategies to help your son avoid times or situations when it's hard not to spend. Encourage him to have friends over rather than hanging out at the mall.
- Have him avoid long term commitments, such as cell phone contracts or gym memberships. Three years can feel like an eternity to pay for something you don't really need.
- Set shorter and longer term goals such as saving for a new iPod, the down payment on a car and post-secondary studies. Break goals down into bite-sized pieces and celebrate your son's successes with him.