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Teens and Money

How Parents Can Make the Grade

Advising a teenager is an art that few have mastered – especially when it comes to money management. During our children’s teen years, we basically are trying to keep the bumpers on, letting them have minor crashes while we help steer them between the lines. Their finances should follow the same format. Some parents opt not to let their teens work while attending school. Others say work is reality; sacrifices have to be made in life. No matter your opinion, there are basic guidelines to consider.

If you do choose the allowance route, I recommend connecting it to schoolwork. At this point in life, their job is their education. Time and effort are expended during the school day, and skills are honed through homework after school. If a teen’s overall job performance warrants compensation, then compensate. However, should your child’s performance be less than stellar (based on potential), give no compensation. Keep it simple, paying according to project grades and report cards. Most occupations are evaluated on the net results, not the process, so paying for daily or weekly grades that are not a measurement of overall performance doesn’t reflect the real world of finance. You can also evaluate the previous year’s performance annually and increase the allowance or keep it the same, depending on the results. If during the school year performance starts to suffer, have a conversation to see what might be happening before you withhold pay. Sometimes grades fall for reasons other than poor study habits, procrastination, or laziness. By inquiring first, you foster concern which helps strengthen your relationship.

If you believe your teenager should work while in school, monitoring is simpler. If grades begin to suffer, work schedules are reduced and there’s less spending money.

Also, before the first paycheck arrives, have a conversation about systematic savings. In my 22 years of practice, those clients who saved incremental amounts on a systematic basis accumulated far more than those who relied on bonuses and tax returns to augment their savings. For the same reasons, encourage your teen to give you a small amount from each paycheck to hold until it’s enough to open a savings account at the bank. Remember: The overall amount is not as important as instilling the habit of saving and teaching the value of money.

Whether your teen earns money through a job or academic performance, require him to pay money toward the expense of living. For example, making a contribution toward car insurance or paying for extra-curricular activities helps teens recognize that money is needed for basic living, not just discretionary spending. This reality check early in life may keep them from experiencing negative consequences later when they’re out on their own.

We parents should always be preparing for what one of my best friends calls the launch. A little dose of financial reality now goes a long way in raising responsible, productive, and self-supporting kids.

Angie Fritter has worked in the finance industry for over 20 years. She is President of The Fritter Group and a mother of one.

Angie Z. Shay has worked in the financial services industry for more than 22 years. She is president of THE PATH Financial Strategies, LLC. Angie Shay is a financial adviser with Eagle Strategies LLC, a Registered Investment Adviser and an indirect wholly owned subsidiary of New York Life Insurance Company. THE PATH Financial Strategies, LLC is not owned or operated by Eagle Strategies or its affiliates. Neither THE PATH Financial Strategies, LLC or Angie Z. Shay provide tax or legal advice.
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