Allowance for Teens: A Callout to My Teammates
by Jill Suskind, WealthQuest for Teens, Ltd.
Money skills profoundly affect the quality of our lives AND our ability to make a difference in the world in ways that are important to us. That’s why we are all looking for ways to offer these skills to the teens in our lives, and an allowance is one tool that can be very a very effective teaching tool. At the same time, an allowance can be disastrous.
If you give your teen an allowance, but you don’t like what he or she is doing with it, then please consider this: Your child might just be practicing bad money habits with your money!! Habits are hard to break, too. However, an allowance, when offered as part of a financial education, is a powerful teaching tool. In this context, an allowance can be an opportunity for your teen to develop great money management habits.
Take it from me; my money was a disaster until I was about 38 years old. I always had income, but I never had any money in my pocket. When I was young, I blamed it on my allowance; when I got older, I blamed it on my teacher’s salary. I always thought I just didn’t have enough income. More recently, though, when I began to turn my financial life around, I realized that I was thinking about and organizing my salary the same way I managed my allowance, with some minor cosmetic changes that made me think I was being adult about it.
But here’s the part I was missing: I didn’t have a good way to THINK ABOUT money that would LEAD to organizing it in a way that worked. What was missing was a financial education. That’s the part that isn’t talked about nearly enough, and this is where an allowance can be a powerful teaching tool.
So how can we use this tool to make sure the teens in our lives are getting that experience? That question fascinates me! I am on a mission: to prepare this generation of teenagers to meet the financial realities of adulthood with confidence and competence. I am looking for as many parents and teens as I can find who are passionate about this goal. I bet, if you are reading this article, you are on my team!
I say this because I start with the premise that every parent wants their child to think about and organize their money effectively. The other part I acknowledge is that every teen wants to be able to manage their money in a painless, simple, and effective way. Teens want to know, also, that they are prepared for the adulthood with excellent money skills. The challenge is to provide them with that education in a way that motivates and even inspires them.
But how often do we meet teens who are really prepared in this way? In fact, this kind of education is very rare. As a high school teacher, many of my students tell me that they feel trapped by a belief that they won’t have much money, so they have to limit their expectations of life. Others plan to find jobs with big salaries. They don’t realize you can be just as broke with a big salary as you can with a small one. They also tell me that they WANT to learn about money and how to manage it so they can thrive in life and make the world better, too. Most revealing of all, though, is they know that no one is teaching them this in a way that works for them. That is a pretty harsh bit of feedback, wouldn’t you say?
It’s consistent with the research, though. In the Charles Schwab 2008 Parents & Money Survey Findings and the Teens & Money 2007 Survey Findings, parents and teens report the following:
• 89% [of teens] say they want to learn how to make their money grow.
• Despite overwhelming interest (89%) in learning how to make their money grow, only one in five (20%) report that “my parents/guardians have taught me how to invest money wisely to make it grow.”
• Parents don’t realize their teen is interested in learning about personal finance.
The last bullet is especially relevant, because parents are the primary financial educators in a child’s life. Barbara McRae, bestselling author of Coach Your Teen to Success and a nationally known parent-teen expert says, “…I believe financial literacy is one of the primary responsibilities of a parent to offer their children in preparation for adulthood.”
So where is the source of the problem? Even though we are adults, it is a really courageous (and worthwhile!) act to admit that we don’t really have a great handle on WHAT we need to teach. I mean, what parent wants to admit that to their child? Or to ourselves, either! It’s a very sensitive subject, and it’s loaded with ways to be personally offended and feel defensive. It’s unfortunate, especially becauseth life is profoundly different when your money works an when it doesn’t. It’s a complex issue and one that really puts parents in a difficult predicament.
After all, most of us have struggled to invent a way to manage our money that works pretty well, so we like to think that we have mastered the subject. However, David and Tom Gardner report, “Few people ever receive any kind of formal education about money. Most adults are playing it by ear…most of them are very insecure about their money. …And quietly, if not openly, many people feel ill equipped to face the challenge of managing money throughout their lives.” (The Motley Fool: Investment Guide for Teens)
So, we are really set up in our culture to have problems in this area. In reality, being financially illiterate is a cultural norm, and we don’t even realize it! It’s no surprise, then, that most people have a hard time with money because they have never really learned much about it. As a result, adults often face:
• Unmanageable credit card debt
• The stress of living from paycheck to paycheck
• Living lives that are limited by a limited amount of money
The problem is actually worse than this. The President’s Advisory Council on Financial Literacy said in its 2008 Annual Report to the President: “While the [current economic] crisis has many causes, it is undeniable that financial illiteracy is one the root causes…It is essential to provide basic financial education that allows people to better navigate an economic crisis such as this one…No longer can we stand by and ignore this problem. The economic future of the United States depends on it.”
We are all committed, as parents, teachers, and caregivers, to prepare our children with the skills they need to be successful in life. In light of this commitment and responsibility, let’s examine some common approaches that don’t seem to work very well. You might know someone who practices some or all of these methods.
The Need/Want Approach: I hear it all the time when I am in the grocery store and at the mall—parents saying to their children “You don’t need that”! Parents often complain that their children spend money on things they don’t need. This doesn’t work because we each have our own individual set of needs and wants, and they even change as we grow and go through life. The Need/Want category has a way of sounding like a judgment lecture to teens, which, we all know, doesn’t go very far.
The Budget Approach: Living on a budget is like living on a diet. Ouch!
The Pinching Pennies Approach: Ouch! Very constricting and restricting! This is a great way to survive on a salary, but it’s not based on a good financial education or a positive relationship with money. It’s not inspiring or motivating, either. Of course, shopping for bargains is great, and it’s not what I mean by “pinching pennies”, just to be clear.
The Take-Care-of-It-Later Approach: Some parents think they can let their children learn to think about and organize their money later. Later becomes more of later. Later becomes a learned habit of mind. Some people think “when you have more money or when you have a job, THEN you can learn about money. That’s like saying “after I lose weight, I will develop good eating and exercising habits”. Whether your teen has a lot of money or a little, or a job, or just money coming in from birthdays and holidays, your teen can learn good money management habits and attitudes that will last a lifetime.
The Unstructured Allowance Approach: This way, all too often, kids develop and practice bad habits that they have to unlearn when they become independent. This is the approach that I am most familiar with! My parents really thought they were giving me the opportunity to figure out money on my own, and I really appreciate it. The pitfall is that money isn’t instinctive, and the live-and-learn approach leads to pretty haphazard results.
So, what DOES work? Here is a way to present a great financial education to our teens--some basic concepts to teach them.
1. Our net worth is the result of our habits and attitudes about money. This is true now and for our whole life. If we want to change the amount of money that we have, we just have to change our habits and attitudes. This is MUCH EASIER when we are young than when we are adults.
2. There are four basic areas of wealth building that teens can begin now.
a. Income. There are three kinds of income (earned, passive, and portfolio). It’s important to let teens understand that a big salary does not lead to financial health; by the same token, a small salary does not lead to money problems. (Habits and attitudes determine net worth!)
b. Knowledge about money. The more we know about how money works, the better we are able to grow our money. Read, explore, ask, discover, and be curious. Take classes, do online seminars, read online magazine. People who are masterful with money engage in lots of experiences where they get to explore it.
c. A great money management system. This is a key element! With money, we can either tell it where to go or ask where it went. Those are the only two options! Money management is all about telling money “where to go.”
d. A great reason! We all need a good reason to go to the trouble of managing our money well. When we are inspired by our life dreams and the difference we can make in the world in ways that are important to us, we are motivated to make our money work. So, instead of choking our dreams with budgets and restrictive attitudes about what we can give ourselves, let’s start with “what do I want?” And then go to “how can I afford that?” and temper it all with “am I willing to do what it takes to afford that?” and “when will I be able to afford it if I decide I want to afford it?” This approach comes from a healthy and deep understanding of money.
This is the foundation of a great financial education. It’s a solid beginning of a journey that lasts a lifetime, and the sooner we begin that journey, the farther we can go.
There’s a lot to teach teens about money. If we do that job well, the teens in our lives will be equipped to face the financial realities of adulthood with confidence and competence. With effective financial habits and attitudes, young adults get to focus on their new careers, new homes, new families, new independence, and the early but powerful stages of building wealth. Please join with me and empower the teens in your life by giving them this education.
Jill Suskind, from Andover, MA, has been a public school teacher for the past 23 years. She is currently on a leave of absence, thrilled to be working full time on her mission: to prepare this generation of teens to meet the financial realities of adulthood with confidence and competence. She is committed, this year, to be a valued resource and partner for the homeschooling community. Jill is most eager to hear readers’ thoughts, questions, and feedback so that she may serve this powerful and growing community.
Jill Suskind
President, WealthQuest for Teens, Ltd.
http://www.wealthquestforteens.com
email: jill@wealthquestforteens.com
Serving a world-wide community of teens who build and celebrate wealth responsibly...
