Give your teen responsibility
Pocket money is often the first financial responsibility we have; but its purpose can be more than just a bit of fun money. By giving your teenager a set amount of money on a regular basis and giving them the freedom to manage it themselves, they’ll learn valuable lessons about the importance of budgeting and responsible spending. Which leads to the next point …
Let them blow it all at once – and then let them pay the price
Part of giving your teenager the responsibility to manager their own money is giving them the freedom to make their own mistakes. When they first start having a regular income (whether it’s pocket money from you or income from part time work), they’ll face the temptation to spend the lot in one hit, and chances are this will happen.
It’s important if it does happen you let them live with the consequences. It might be easy to act as their ATM when they run out of money, but by letting them live with the reality of having to go without income until they next get paid, they’ll more likely be learn financial responsibility.
Which of course leads to the importance of …
Having a budget
You don’t need to be managing a household worth of expenses to find having a budget worthwhile as a simple budget can still have the benefits of setting good money management skills. A good budget will have set amounts for spending on weekly fun and entertainment as well as money set aside for saving for different milestones.
Demonstrate positive savings habits
Your teenager is likely to be more motivated when they have a savings intention in mind. Let’s say a short term objective may be for a new pair of trainers, while a longer term ambition at the same time might be for spending money for an overseas trip the family is taking later in the year.
Think about putting a little bit away on a regular basis
Encourage them to put a little bit aside each time they get paid, both for smaller and larger milestones. Contributing to a savings account on a regular basis is a great way to see money grow over time. It’s worthwhile looking for an account that could reward them for saving – for example, a Westpac Life account offers a competitive base rate as well as bonus interest for regular saving when certain conditions are met.
Set the right example
As in other areas of life, teenagers are likely to copy the financial behaviour of their parents. That means if you’re in the habit of saving up to buy something, your kids may be more likely to do the same.
One way to set the right example may be to include your teenagers in some of your financial decisions. Taking them to the supermarket with a strict budget in mind is also another way of teaching them sound financial habits.
A great way to teach your teenager or child fiscal responsibility is to open a savings account for kids.