Money Skills for Kids

Lesson 4: High School Children & Teenagers And Money

Valuing money, overcoming peer pressure to consume, and disregarding advertisements

Now that your children have expressed the urge, desire, and drive to earn money, it is high time to reinforce the lessons learned during their first introduction to the art of budgeting. Previously, younger children were already acquainted with this concept using the 4-Bank System , while older children worked with a rudimentary paper budget. At this point, the children will need to learn to put the figures on paper within the confines of a ledger. The concepts of “How much do I have”, “How much did I spend”, and “How much do I need”, easily translate to the columns of a ledger-based budget. Similarly, if you have access to a computer-based budgeting system, it would be appropriate to introduce your child to it now, and allow her/him to experiment with figures, charts, etc.

“How much do I have” calculations should factor in long-term savings, but it should be very clear that these savings remain in the bank for whatever item you and the child designated them to be used in the future, i.e. a car, a college education, etc. At the same time, if you have begun to lend money to your child, s/he will need to keep track of how much s/he owes you, and what the weekly or monthly payments are. This is a great opportunity to teach your child that spending any extra money comes after all debts are paid off.

Once your child is clear on how much money s/he has to work with, s/he will need to determine what s/he needs to save each week, or, alternatively, whether or not s/he needs to curtail her/his spending. Ernst & Young offer a great budgeting tool your child can use her-/himself to calculate these figures! (3)

Pitfalls

Once your child has a firm grip on her/his budget on paper, it is time to introduce her/him to the pitfalls that can lurk along the way:

• Credit Cards.
  While you will be able to ascertain if your child gets to carry plastic while living with you, remember that you are preparing her/him for the real world, where credit card applications arrive with the daily mail, and the lure of quick cash is a siren song too many a young adult has fallen for. Instead, explain that credit cards are great to buy things in an emergency, like a taxi cab to get a ridge home from a party, when the originally scheduled ride did not show up, or to buy things with a warranty, many credit cards offer warranties on the items you purchase with them, yet the teen must understand that these cards are loans, and must be paid off monthly. It has been reported that $5,000 in credit card debt at 18 % interest taken out at age 20, will take 30 years to pay off, if only the monthly minimum payment is made. This is an eye-opening figure, and is worthy of frequent repeats! Get online and let your child play through the various activities at the “Consumer Jungle”. (4)
• Cell phones/pagers.
  These little gadgets have wormed their ways into the waistbands of most modern American teens and are most likely here to stay. While most adults get lost easily in the calling-plan/free long distance/analog versus digital maze, how much more confusing is this for kids who just want to get their hands on the goodies? To this end, it is up to you, the parent, to shop around for, and purchase, the service plan, phone/pager that makes the most financial sense. Then sit down with your child and explain what you based your decision on, and how to make sure s/he gets the most out of the calling plan you purchased. There is an online activity available that will allow your child to really get a grip on the ways to save money as well as the possibilities of wasting money. (5)
• Peer pressure.
  Your child wants Nike’s, you think s/he will do just fine with the store brand shoe. The compromise is obvious...you are willing to contribute the amount of money that the store brand costs, and leave it up to your child to earn the difference. What may not be so obvious is the learning experience. Your child will now understand that s/he can have all the things her/his friends get, but s/he is expected to help with making this happen. Your child will learn that some things may just not be worth the effort, while other things are. Additionally, s/he has much more stock in the investment than her/his friends, and will probably be much more careful with it.
• Advertisements and commercials.
  This is a good time to revisit an earlier discussion on how TV, radio, magazines, and advertisements seek to sway us to value certain goods as being very important things in our lives. Ask them to think of an item they have in their room, and then make up a commercial for it; chances are, they will embellish the truth a bit, and detract from the scuff marks on the item. Explain to your child that advertising using the media works the same way. Commercials are used to create needs that only the advertised product can, supposedly, fill. You child will be able to recognize that commercials are sneaky ways of manipulation, even if they have a favorite pop star hocking the item.

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