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May 29, 2019

Adults In Training (Or How Parents Can Help Their Teens)

by Janet Gray

When you think about it, aren’t teens just adults in training? Teenage years are a time of transition—from few childhood concerns to more adult responsibilities.

If you have a child between 13 and 19 years of age, you have a teenager. You know, the ones who don’t really listen to you and/or roll their eyes when you speak to them?

Still, you persist in helping them to understand family values and society’s expectations. You assisted them with basic knowledge of many things like walking, talking, riding a bike, reading etc. You help them hone those skills until they can independently do them.

Would it then surprise you that many parents do not talk to their kids about money? Sure, maybe some of the basics about earning money and paying your bills. But not the deeper and practical stuff that allows teens to make meaningful decisions, resist peer and societal pressure, understand the power of marketing, and create lifelong tools of financial literacy.

You ask “How?” That is the tricky part, of course. The best time to share financial teaching with your kids is at an early age. (See my article “Raising Money Smart Kids” in February 2019 edition of Canadian Moneysaver.) The earlier the better, but any time is a good time to start.

As with any topic, kids learn best if you treat them as equals (age appropriate, of course) and don’t lecture them. Start with a positive attitude, use relevant and realistic examples, and be open to honestly answering their questions.

Often the conversation gets more ‘real’ when your teen gets their first job. Any previous money conversations have been theoretical because it’s been about money that you (the parent bank) have given them. Up until now, they have had no skin in the game with their personally earned money.

This is also a time where they further stretch their limits and gain new financial freedoms while also potentially picking up unhealthy money habits like impulse or overspending, poor purchase decisions or planning. Modifying these behaviours while building good habits is a gift that keeps on giving. Forever.

Start with that first pay whether it’s large or small. Discuss the difference between the gross amount (before deductions) and the net amount (your pay). It’s a rookie error to calculate pay based on hours worked times wage paid and then spend that amount while forgetting about income tax and other deductions. But this is the point where they start to manage their own money.

Your teen has been used to you paying for everything. Paying for things themselves is truly eye opening. A real-life experience is to take your teen grocery shopping with a fixed amount of money to plan an easy meal (like spaghetti). Make a list, check the flyer for the deals and then off to the store to look at the price tags, make comparisons and prudent choices, and pay the bill at the cashier.

Show teens your household budget and share some bill amounts to help them learn about real-world costs. It will also help manage their expectations so that they’re in line with what your family can afford. Work with them on a budget until they can make their own spending and savings plan. Treat them like an adult, use the “we are all in this together” approach as a family and the results will be worthwhile.

Parents: resist the temptation to give your teen more money to fix things. This needs to be a time of allowing them to make mistakes and live with the consequences of their choices. A lesson better learned now with relatively minimal financial impact than later as an adult with more expensive and sometimes irreversible consequences.

Have your teen think about how much things cost in terms of hours worked. And then compare the cost of the item they want to the number of hours they would need to work to pay for it. “I went to a movie/dinner and spent $50 and I had to work a 4 hour shift to earn that money”. What other choices did they give up by spending this money now? For example, explain how spending money also means they miss the chance to earn interest if they had saved/invested that money instead. This will help them when they need to choose between options in the future.

Discuss goal setting based on their values. Do they value time with friends? Planning for post-secondary school? Use the SMART system (Specific, Measurable, Achievable, Realistic/Relevant, and Timebound) to help them determine realistic goals, both large and small. Early exposure to goal setting will help them with important life skills like patience and vision.

Also take time at this point to discuss financial freedom. How they can benefit from accomplishing their goals by saving now to spend later. And how responsible management of money will also help them with the healthy use of credit when buying large ticket items like a home or car. Credit takes away their financial control because they are indebted to others so teach them to use credit only if cash or savings are not an option.

Divide teen’s pay into four different categories. For example, use 50% for immediate discretionary spending (clothes, entertainment), 20% for saving for short-term (holiday in 2 months), 20% for investing long-term (university, first car) and 10% for sharing (charities). This way they’ll have the money to pay for future purchases and will learn planning principles.

Some teens work better with visual cues. Set up a savings jar for the 50% in cash. As the money is spent, add the receipts to the jar. At end of month, review all the receipts to see if the spending is really where they wanted their money to go. Tracking your spending versus your income is a valuable financial habit to learn.

With more independent spending by your teen, talk about the impacts of marketing and branding on their needs and wants. Help them to develop critical thinking and healthy skepticism about buying pressures. Evaluate their own needs versus wants. Introduce the topic of environmental waste resulting from excessive consumerism. Assist them to become a better consumer by researching and comparing prices and resisting trends and impulse spending.

Make sure your teen has a chequing and a savings bank account. Encourage them to set up an automatic transfer of their income to savings accounts as above. Get a debit card— its use is a good learning process to the eventual credit card. The teen can learn about PIN and password safety, ups and downs of bank balances, and starting to deal with financial institutions.

If you pay your teen an allowance, pay them less frequently (more like a pay period) like every two weeks or monthly. This forces your teen to manage money over a longer time period and helps them learn to plan and make choices about how they spend their money.

Have a discussion with your teen about what you now expect them to pay for with their allowance/pay. Things like entertainment costs, cell phone plan, hobbies, clothing and gas for the car when they use it. Make sure your teen understands what you’ll continue to pay for.

Consider raising the amount of your teen’s allowance gradually as they get older. As the allowance increases, let your teens be responsible for paying for more of their expenses. This will help them to learn how to budget.

Inevitably, your teen will ask to borrow money before their next allowance or pay. Again, a real-life opportunity to talk to them about credit, loans and interest. If you decide to lend them money (but try to resist), consider charging a small amount of interest and agree on clear repayment period. This will help them understand credit and teach them that it usually costs money to borrow money.

These financial lessons are also helpful in other areas of life and its choices. It develops a sense of self-responsibility and maturity in work and relationships.

Teaching your teens about money and financial responsibility is not a crash course. It takes patience and persistence so that they will have consistent learning to develop healthy and lifelong financial habits. And become a role model for the next generation.


Janet Gray, B.A., B. Admin., CFP®, CHS, EPC, CPCA, is an advice only, fee for service Certified Financial Planner (CFP®) with Money Coaches Canada. She frequently appears in media and can be reached at



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