A recent survey by Packaged Facts indicated that teen income in the United States will increase about 14 percent in 2011, surpassing the $91 billion mark. Sources of teen income include jobs, allowances, “as needed” money from parents, and gifts. The same survey estimates that 12-14 year olds currently have an average income of almost $2,200 while those 15-17 years of age have about double that amount. On the average, that’s more than $40 a week for the younger teens and $80 a week for older teens.
However, the secret to a successful financial future is not based on earnings. Financial success is dependent on how we use our money—not how much we earn. While income is important, developing a pattern of responsible spending is even more critical to building long-term financial wealth.
Teaching tweens and teens about money is an ongoing lesson, and there is no rush to teach everything in one day. The key is to start. Providing multiple learning opportunities will help ensure kids develop savvy financial behaviors that will last a lifetime.
While Oklahoma public schools now have a mandate to teach personal financial literacy as a graduation requirement, research shows that children tend to model their parents when managing money. So, how can you ensure that your children are following the best example that you can set?
Here are few tips to get you started:
- Introduce the idea of “savings.” Requiring children to set aside a small percentage of their allowance, baby-sitting or lawn-mowing income, or gifts from Aunt Sue will help establish a savings pattern. You may choose to have them put the money in a piggy bank or open a savings account at your local financial institution. Saving early and often is the foundation for developing good money management skills. A savings account has the added bonus of earning interest, which can be incentive to establish a positive behavior. You may even want to consider helping them to purchase stocks or bonds for long-term savings options.
- Encourage earning opportunities. While some parents are uncomfortable with paying their children for household chores, it may be possible to establish a list of “required” household tasks and “bonus” tasks. In doing so, young people learn that money is earned by completing some type of work, and it helps them better appreciate what you spend as a family on their wants and needs. Earned income may also come from another source, such as helping a neighbor rake leaves or securing a job from a local employer.
- Talk with them about their goals. Encourage them to be open and honest about their hopes and dreams. While you may feel the need to guide their choices or decisions, sometimes it is more important to just listen and allow them to formulate their own ideas. Once they start writing down their goals and setting timelines, you can help them make realistic benchmarks for accomplishing them. It is important to identify the potential financial commitment to meet those targets.
- Start simple. Even for small items that your children wish to buy, involve them in the thought behind making the purchase. You may help them comparison shop online and with local merchants, then use their savings—or with a match from you—to make the purchase. You may eventually want to talk with them about saving for college, a car, or other more significant expenses.
- Teach them to give to others. Whether it’s tithing money at church or donating time at the local food bank, getting into the giving habit is a sound financial management principle for your child. It prepares them to be good citizens and to think of others instead of just themselves.
- Establish a spending plan. The key factor to each of these money tips is helping them build the skills to manage their resources. With a spending plan, they are able to see where their money is going. It also provides a framework for transferring some of the responsibility for buying clothing and other necessities to them, helping young consumers realize how much they cost and the income required to make those purchases. Helping tweens and teens develop good money management skills is part of learning personal responsibility. It allows young people to become more independent and better decision-makers about the choices in their lives. And it’s never too early—or too late—to start!
Sue Lynn Sasser, PhD, is a professor of economics at the University of Central Oklahoma.