The Teen Challenge

Teens and money go hand-in-hand.  
It’s from your wallet-to-their-wallet that you want to control.   

Teens are one of life’s challenges.  Most teens want to test their parents on just about everything.  Maybe it’s in their job description.  When it comes to money, this group is a mighty force, spending over $100 billion a year!  No wonder advertising and PR firms spend mega millions to entice your kids to their products.  

You do your kids, and yourself no favors when you hand money over at their asking.  It’s not uncommon for families to talk about the perils of not telling the truth, stealing, drugs and sex.  Yet, the majority are quite reluctant to talk about money.   It’s almost taboo, something that just isn’t proper to talk about. These teens learn early about the Bank of Mom and Dad—one that has unlimited hours.  For some, unlimited funds. 

At some point, teens start pressuring for a car.  Of course, they promise they will pay for it and drive ultra safe.  The odds are that if your teen is a son, he will have an accident.  Much lower odds for daughters—that’s why car insurance for males under 25 years of age is so expensive.  Where does the money come from?—usually an after-school job. 

With a job, the odds now are that school grades will decline, alcohol and drug use begin or increase, materialism rears its head (if it hasn’t already), and parental authority begins to vaporize.  With that said, let’s look at the pluses.  After-school jobs help teens to mature and prepare them for the outside world.  There is usually a sense of pride and an increase in self-esteem and confidence. Good things to have in the backpack of life. 

Collectively, teens earn billions of dollars every year.  The question is, do they also save billions?  Nope.  They outspend what they make by approximately $5 billion a year.  Where does the excess come from—you get three guesses, only the first one counts—you, the Parent! 

You can’t help but wonder if a monster hasn’t been created.  What correlation can be expected between teens’ spending and saving behaviors and those they display in adulthood, if they now outspend what they make by more than 5 1/2%?  The potential for indebtedness could be a financial back-breaker.  It is, therefore, critical that your teen has broadly based financial management skills. 

Time For Action For Both of You

To find out what your teens know about money management, duplicate the test below and have them take it.  But first, take the test yourself, giving the responses you think they are likely to give.  You will have some idea about the degree of penetration your money counseling has had in their minds.   Or, you will have a goal that they know what’s below by the time they get ready to leave the nest.  Then, compare your teens’ answers with yours.

 Teens $mart-Money Savvy Quiz

1.	Do you know how to open a checking account?	Yes ____	No ____
2.	Do you know how to balance a checkbook?	Yes ____	No ____
3.	Do you know how to open a savings account?	Yes ____	No ____
4.	Can you name three types of savings programs, other than a passbook savings account?	Yes ____	No ____
5.	Would you know how to stop payment on a check if you needed to?	Yes ____	No ____
6.	Do your outside earnings account for more than 15% of the total balance in your savings account?	Yes ____	No ____
7.	When you run out of checks, do you know how to order more of them?	Yes ____	No ____
8.	Do you understand all the entries on monthly bank statements for both checking and savings accounts?	Yes ____	No ____
9.	Do you know the difference between a bank, a savings and loan institution, and a credit union?	Yes ____	No ____
10.	Do you know what interest rate is charged on the unpaid balance of your credit card or on one of your parent’s credit cards?	Yes ____	No ____
11.	Have you been saving 10% to 25% of all money that you receive from parents, gifts and outside jobs?	Yes ____	No ____
12.	Do you have money left over at the end of your pay period, either weekly or monthly, after all your expenses have been paid?	Yes ____	No ____
13.	Do you know who to call if you lose a check book or a credit card?	Yes ____	No ____
14.	Do you know how to use an ATM card?	Yes ____	No ____
15.	Do you know how to get cash in an emergency — day, night or out of town?	Yes ____	No ____
16.	Could you make up a livable spending plan for yourself without your parents’ assistance?	Yes ____	No ____
17.	Do you understand how to read a simple contract, such as the one found on the back of a credit card application?	Yes ____	No ____
18.	Do you know how to get car insurance?	Yes ____	No ____
19.	Do you know what penalty or penalties are assessed when you make a late payment on a credit card?	Yes ____	No ____
20.	Do you know what a credit report is and how to get a copy of yours?	Yes ____	No ____
21.	Savings accounts earn interest; do checking accounts?	Yes ____	No ____
22.	Do you buy on impulse?	Yes ____	No ____
23.	Do you know how and when to file federal and state tax returns?	Yes ____	No ____
24.	Do you know what an IRA is?	Yes ____	No ____
25.	Do you know what travelers checks are and how to get them?	Yes ____	No ____
26.	Do you know what a lease is and what the contract should contain?	Yes ____	No ____

How To Score:	Give every Yes answer 2 points.  Give No answers 0 points
If your teen scores:
40 to 52 points:	Help him pack his bag, he’s ready to leave home or perhaps even support you.
25 to 39 points:	He’s on his way, but still needs input from you.  He can read this book, so get him his own copy.
24 and below:	You both need to wake up fast, otherwise he will never be ready to leave home.  You may have to support him the rest of your life.  Not a good idea.

Next Up

Ask your teen(s) if he wants to learn more about and how to use money and be a player in the adult world.  It will be a rare teen who turns you down. 

• If your teen has a driver’s license, “hire” him or her as your personal assistant for a long vacation period, summer is ideal.  This means that you are accompanied on various shopping expeditions and errands—groceries, cleaners, dropping off and picking up younger siblings, the vets, the bank—where ever you need to drive to and/or write a check. 

Not only can your teen chauffeur you, he will pay for everything you normally do by writing your checks and paying your bills.  This includes mortgages or rent, taxes, insurance and the like.  You get to sign the checks.  Initially, he will think this is fun.  After a while, it becomes a drag.  Reasonable wage is the minimum federal wage rate.  If it’s higher in your state, then match it. 

• Let your teens know how much money it takes to run your household.  Open up your check register or the money software program you use on your computer.  Have him make the entries for checks written and items that get automatically withdrawn from you account.  If your income varies monthly, this is a perfect opportunity to discuss why you need savings backup and a realistic Spending Plan.

When I did this with my teens, they were stunned at the amount of money it took to run our household.

• Check out “Hot” career projections in national magazines such as Business Week and U.S. News & World Report.  The Internet is a great resource to see what is topical—the home pages of AOL, Yahoo, CNN, etc. commonly run workplace and career related articles.  
   
• Your kids are on the Internet all the time—have them do a Google search for opportunities and print out the results.  Ask your teen what kind of work sounds interesting.  Discuss what various jobs pay and what kind of education or training is required.  
   
• If your teen is car bound, set some rules up.  Include financial and safety responsibilities.  If your teen doesn’t hold up her or his end of the bargain, privileges are suspended.  Set up the conditions for any suspension and reinstatement of privileges when the driving license is first obtained.
   
• If your teen gets an after-school job, set up rules to monitor behavior and grades.  Any violations, a family talk is in order.  Set up a probation time-off.  If grades or attitude don’t improve, the consequence is that the job is terminated.
   
• If, and when, your teen gets a job for pay, make a condition that a %age is set aside for savings.  If money flows through fingers like water, offer to be the “bank” and withhold an agreed upon amount.

Your Final Money $mart Tip 

Teens are interested in money.  They need to be taught how to save and spend wisely.  You’re the teacher.