Making money is great ... Now manage it
While the good intentions are there, the results can be quite different. If you are not careful the part-time job can be more of a drain on a parent’s pocketbook than anticipated.
That first paycheck can be an exciting, but this is when parents need to teach money management and get involved in what happens to that paycheck each week.
Managing money is one of the most critical skills we can teach our children. It’s easy to sit on the sidelines and let your teenager accumulate debt because they have some weekly income.
Some children may have the good sense to put money away but many get caught up in the material world in which they live. Remember, it is not how much you make but how much you spend that determines your financial well being. It is difficult for a teenager to comprehend that principle when they are inundated with daily advertising for all kinds of things they don’t really need.
One of the first things that you need to do with your teenager if you have not already done so is open a bank account. This gives them a place to put their money, and it is even better if the employer makes a direct deposit. In addition, it is a good idea for the teenager to have a bank card. This can be a good way to learn money management without risking the debt problems that can accompany a credit card.
When it comes to money, the most difficult thing for most individuals — and your teenager is no different — is the art of saving. Saving should be something that, as a parent, you insist take place. The best way to achieve this is by arranging, preferably with the bank, for a direct withdrawal from your teenager’s account Obviously, your son/daughter has to be on board with this. The bank manager doesn’t really want to be in the middle of family feud.
If your teenager begins work, and with your help has arranged a direct withdrawal into a savings plan, then you have set your son/daughter up with a fundamental money management strategy that should last a lifetime. That is, if an individual places a small percentage of one’s salary away each week, sooner or later, that individual will no longer miss the amount that is being put away. Savings will accumulate and eventually there will be pride generated in the amount saved – not just in the designer shoes purchased.
Remember, when teenagers begin working, they have no expenses to worry about. It is easy for them to waste their hard-earned money on items that they will simply give away within a few short years. By establishing a pattern of saving, a teenager learns to live beyond the moment and is more prepared for the unexpected. And as parents, we know the unexpected usually happens.
The key thing to remember here is that there is also long-term gain by establishing the savings account. This habit will likely remain with your teenager for the rest of his/her life. That means they will have a cushion when an emergency comes along and it won’t have to be mom or dad.
Tips for Parents of Working Teens:
- Limit hours so they don’t interfere with school
- Discuss a reasonable amount to be automatically sent to savings
- Visit the bank with your teenager to set up accounts
- Encourage “smart” purchases that involve discounts
- Celebrate saving milestones (i.e. $500 saved)
- Watch and comment on spending habits
- Make sure money is being used for healthy and legal activities