Most kids aren't born with an innate talent to manage money. This is a skill they need to learn from their parents. And one of the best ways we can teach our children about basic finances is to give them an allowance and then let them make some real financial decisions during their teen years.
How much money parents should give their teens is always up for debate. But if you're going to err on the side of too much or too little, I always recommend being generous. Without ample funds, kids don't have enough cash to manage and can't learn from their spending mistakes.
Just to be clear, I'm not suggesting you hand over your entire pocketbook to your teenager. Learning to manage money, after all, takes time. But you may want to consider this approach: give a high school freshman, say, 25% of her entertainment and clothing budget and then slowly increase the amount until you reach 100% by her senior year. This way, she will know how to manage a lump sum of cash before she heads off to college, not after.
Still not convinced you want to give your 16-year-old a raise? Here are seven reasons you should hand your teen more money:
1. Budgeting Skills
The cornerstone of every financial plan is a budget. Work toward giving your 17-year-old enough spending money for, say, a month at a time and he'll have to figure out how to make that cash last until the next "pay day". If he learns how to live within his means now, he'll be way ahead of the game once he's an adult.
2. How to Save & Prioritize
Is your teenager hounding you for an iPad? Explain to him that if he saves $50 a month from his allowance, he could have the latest Apple gadget in 10 months. Think he'll still want one?
4. How to Balance a Checkbook
I just noticed my local Chase branch is pushing a checking account just for teenagers. I think the product is brilliant. Have your teen deposit his allowance into a checking account and you can teach him the importance of balancing a checkbook long before he heads off to college.
5. Instills a Work Ethic
If your kid still wants more money even after you increase her allowance, tell her to get a job. You may be surprised to find your "little one" suddenly has a work ethic when she can no longer squeeze any more cash out of Mom and Dad.
6. Saves Mom and Dad Money
How can giving your offspring more cash save you money? You could use her allowance as an excuse to finally set your own firm budget for how much you plan to spend on teen entertainment and clothing expenses. Then make sure you don't hand over any additional funds.
7. Prevents Getting Strong-armed by Your Kid into Spending More
What parent can't be convinced to spend an extra $40 on a pair of jeans or $30 on sneakers? The next thing you know you've just spent $200 more than you wanted on back-to-school shopping. Put the money in your kid's pocket and he may decide to forgo the extra Hollister t-shirt so he can have more cash for the movies.
How much money do you give your teen? Do you think he's ready to manage more?
Stacey Bradford is the author of The Wall Street Journal. Financial Guidebook for New Parents.
Mixed Cash image by stopnlook, Courtesy of CC 2.0.
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