Does your teenager want everything?

Being the parent of a teenager who wants everything all the time can be quite concerning for two reasons: One is the immediate drain on your own finances as you try to keep pace with their current desires. Second is the fear they may be in for a rude awakening as they transition to living on their own in the years ahead.

The majority of generation Z (born between 1996 and 2010) say they don’t have a clear understating of money concepts — especially when it comes to setting money aside for savings or emergencies. If your teen is ambitious and is working or looking for work to help earn some extra spending cash.

Here are a few tips to them get on the right path:

Start the conversation early

Just as you’ll invariably have “the talk” about the birds and the bees, it’s also essential to discuss  healthy spending and saving habits with your children. Unlike the former conversation, though, it’s almost never too soon to start talking about money — the point they start making sense of numbers or asking you to buy things for them is usually appropriate.  

Once you find out how well they understand money concepts, you can adjust your discussion accordingly. You would be surprised at how little teens know versus what we think they know.

Implement the 50/30/20 rule

Building a comprehensive and detailed budget can be time consuming and tedious. Many adults lack the attention span or discipline to fully embrace this habit, so imagine how difficult it can be for teenagers. The 50/30/20 rule is a great alternative that can be surprisingly effective in comparison.

• 50: Half of all income goes to essential spending (i.e. housing, utilities, groceries, insurance, etc.)
• 30: One third of all income goes to personal spending and entertainment (e.g. restaurants, cinema, shopping, etc.)
• 20: One fifth of all income goes into savings (e.g. emergency fund, savings goals, etc.)

Play the long game

Adults often struggle to think effectively about events more than six months to a year in the future. Teens struggle to think effectively about events more than a week in the future. Getting them to consider long-term savings let alone their retirement can be difficult, but not impossible.

Take your teen to the bank to set up some structured savings vehicles which they can easily contribute to but cannot easily access on a whim, such as an RRSP or GIC. Have them commit to a small, but consistent contribution (e.g. $25 per month) and encourage them to check in on their progress every four to six months.

This has two obvious benefits:

1. They will get used to paying a regular monthly bill
2. They will appreciate the power of compound interest in growing their savings

Embrace technology

It’s no secret today’s teens spend a lot of time on digital devices like smartphones and tablets. Use this to your advantage by setting them up with a free budgeting app like Mint, You Need a Budget (YNAB), or EveryDollar.

There are also some fantastic and informative social media groups and message boards which may pique their interests such as r/personalfinancecanada on Reddit which can help to improve their overall knowledge.

Set goals

Goals — even just a small goal to save $100 within six months — help to focus behaviour and keep your teenager committed to an objective. Review your teen’s goals with them and encourage them to readjust their goals as situations change.

Encourage them to keep their goals attainable so there won’t be a feeling of failure if they’re not able to achieve it. And if they don’t meet their goal, seize the opportunity to discuss what happened and what they could do differently in the future.

Did their income drop? Were they overspending on purchases that didn’t align with their goal? Or maybe it is just overspending. Reviewing will also help with accountability.

Encourage frugality

Saving is important, but spending is unavoidable for even the thriftiest among us. When shopping, encourage your teen to shop the sales as much as possible. Try to reduce the stigma around gently used items in the right circumstances (e.g. automobiles, tools, appliances, etc.). Every dollar they can save on a purchase is a dollar in their pocket.

Be patient

Unfortunately, it seems there is less and less instruction on money management throughout the school years. It is up to parents to make sure their kids get the best start to adulthood and are prepared to make the right choices in the future.

Take the time and have a conversation with your teen. There will be ups and downs and disagreements throughout the process, but it will benefit your child for a lifetime — and could end up saving you from future bail outs.