Last summer, Judith Cane’s 14-year-old son Sam checked his bank balance and did a double take. Fifty bucks? That’s all he had left? He was right to be shocked. Only a couple of months before, he’d been sitting on a whopping $400. Sam was convinced someone had broken into his chequing account.
Cane, a financial advisor and president of Antara Financial Group in Ottawa, wasn’t so sure. Between movies, lunches at the mall with friends and video game rentals, cashing in on teenage fun can be expensive. To prove the point, she helped Sam print off his bank account activity statement and together they figured out where that money had gone. It was a wake-up call. “It’s so important to teach kids that lesson so they don’t start thinking of you as the Bank of Mom and Dad,” says Cane today. But how?
Feeling like a personal ATM is something a lot of parents go through, but putting a stop to it isn’t easy. For a lot of parents, having to hear, “But Ashley’s parents gave her the money to pay for it,” again can be enough to drive anyone to reach for the credit card. The problem with mindlessly throwing money to our teens without expecting them to pony up at least a portion of their bill is obvious: They aren’t learning financial life skills they’ll need in a world where the Canadian household debt rings in at $1.3 trillion
and bankruptcies are on the rise.
“I had a very difficult time budgeting my money when I moved away from home because I never learned how. I had no clue,” admits Darlene Gudrie Butts, a Kingsville, Ont., mom of three teens and author of Lessons from the Depression: Eliminating Debt the Old-Fashioned Way (lessonsfromthedepression.net).
Gudrie Butts wants her children to understand the value of a dollar and avoid making the financial mistakes she did, so they’re expected to get a job as soon as they are old enough and pay for all non-essentials. Mom and dad pick up the tab for the rest — and they give resumé and job interviewing advice
“I definitely love having my own money,” says her 15-year-old daughter, Olivia, who works one shift a week at a Chinese food restaurant. “It gives me the freedom to do what I want with it, allows me to spend time with my friends and do things other than just going to their houses, like bowling or going to the movies.”
But what if your teen is not quite ready for the world of paid labour? Some kids may be too young, or parents might want to put the focus solely on school. Although Cane’s son Sam is hoping to get his first job this summer, she has found a way to teach him valuable money lessons now. He gets $100 on the first of each month. Sound like a lot? Not if you consider what it has to pay for: school lunches, text messages over and above his cell phone limit, non-essential clothes and entertainment expenses. “I’m willing to shop at sales so he can get the jeans he wants,” says Cane. “But if he wants them at off-sale time, he’s got to pay the difference”
Coming up with an amount, whether it’s $50, $100 or $150 in one lump sum or in weekly allowance installments, isn’t tough. Simply sit down with your teen and track his spending over the previous month, then decide what is essential and add those items up. This kind of tracking system has another bonus built in: it teaches kids how expensive a night out at the movies really is — not a bad thing to know when it comes time to budget their money next month.
Gudrie Butts is the first to admit these lessons are hard, but turning down some requests for cash is vital to developing a teen’s solid financial footing. “It’s easier to say yes than to say no, but sometimes you just have to do it,” she says.
Three ways to build your teen’s money management skills:
1 SIGN UP FOR ONLINE BANKING: That way your child can hop online, day or night, and pull up a detailed money overview.
2 KEEP TABS ON A CALENDAR:
Do you give your son $100 at the beginning of the month like Judith Cane? Tabulate the remainder as he spends it and write that number on the calendar. That way he sees what he is spending — and how many days are left until payday.
3 USE AN ONLINE WEB PERSONAL FINANCE APP: Try a program such as moneytrackin.com.
The fact that Kira Vermond has been writing about personal finance for over 10 years does not impress her son Nathan, who tries to negotiate a bigger allowance each week.