Getting a handle on teen finances

Anyone who has teenage children should be under no illusion that their little darlings are an enormous financial commitment.

Getting a handle on teen finances

Iona Minton
Tue, 20 Dec 2005
 
This article is a printout from iafrica.com
Copyright © 2000 iafrica.com*, a division of Metropolis*

Anyone who has teenage children should be under no illusion that their little darlings are an enormous financial commitment, and I'm not even referring to formidable cost of educating their young minds.

I'm talking about the constant demands made on your wallet for their leisure activities and designer habits. Most parents will heartily agree that they sometimes feel like some kind of hybrid ATM: part machine, part human. The bad news is that you might be partly to blame, as how you managed your children's expectations in their formative years has a direct bearing on how they view their access to cash now.


If you scored an A+ for teaching them money management skills and Economics 101, heated exchanges may be kept at a tolerable level. Sadly, most of us barely scrape a passing grade on our own financial management, let alone passing good skills onto our children.

A financial awakening
I recently heard a rather amusing story of an 18-year-old's financial "rude awakening." The scene of the incident was the kitchen, while mother was sipping a glass of chardonnay with a friend. It went like this:

Son: "I just went on the internet to check my bank account, I have the grand sum of R30, this is so not OK. I am supposed to be going out with my friends tonight!"
Mom: "Welcome to the real world, this is what happens when you spend money, darling."
Son: "This is so not fair! I had to buy my own paint ball gun and it costs R60 every week for paint balls. I need more pocket money."
Mom: "I need a bigger salary. How else is a girl to afford the next pair of designer shoes? But just because my income doesn't match my spending desires, doesn't give me the right to march up to my boss and demand more money."
Son: "But that’s different. It would not hurt you one bit to give me an extra R50 per week."
Mom: "You need to learn to budget. If you did not waste money on designer labels you would be able to afford the other things."
Son: "That’s not a waste."
Son: "So you are prepared to let me sit at home tonight."
Mom: "Yip."
Son: "What can I do to earn the money?"
Mom: "Wash my car for the next four Saturdays."
Son: "Four? No way! One."
Mom: "Four, or no deal."
Son: "This is slave labour!"
Mom: "So is washing your clothes."
Son: Speechless.
Mom: Silent.
Mexican standoff ensues...

He eventually took the deal with a fair amount of muttering. It was great that she stood her ground, but no matter how hard she tried she couldn't get him to see that the demand for more pocket money was unreasonable.
Teenagers are narcissistic by nature and when it comes to getting what they want or feel they deserve, they fail to see reason. They see their parent’s income as an unlimited resource and by their standards the amount of money their parents earn is obscene.

Time for a reality check
To give them a reality check it might be time to expose them to the concept of the cost of living. They are probably aware of all the tangible costs such as groceries, clothing, petrol and entertainment, but they are often oblivious to the unseen costs. These include rates, taxes, retirement savings, home maintenance, insurance and domestic help.
You don't have to reveal how much you earn, but you can certainly give them a list of your monthly expenses. This will be an excellent exercise for both parties because many people have no idea how much it costs to run a family.
When the list is presented to the teen, make sure you explain the need for retirement savings and insurance. If they think that your savings could be reduced in order to buy them the next computer fad, paint a visual picture of the consequences of not having enough money in retirement. This one usually works pretty well.

Tell them that you are quite happy to fund their lifestyle as long as they agree to fund you when you are old and wrinkly. Let them know that you'll love living in an extended family environment, playing your Pavarotti discs and holding bridge nights with the local old age home residents. Dreamily muse about hanging out with them and their friends at dinner parties, telling all who will listen what a cute butt your cherub had when he/she was a baby (with 16 photo albums in tow to prove the point). These images should be enough to quench their thirst for things material.

Let them make mistakes
The best way to manage the cost of a teenager is to give them a weekly or monthly allowance. From the age of 15 you could give them enough to cover clothing, toiletries, miscellaneous purchases (within reason) and entertainment. You will have to sit back and watch them make mistakes. Do not bail them out — the lessons learned here will be valuable later on. If they decide to spend an entire month's allowance on an exotic T-shirt or a boyfriend's birthday gift they must live with the consequences.

As they get older and go off to college or university they may be fortunate enough to receive a car from you. With this gift comes some major additional expenses such as petrol, insurance, and maintenance. If this is the case I'd strongly suggest that you get your teenager to find a part-time job to fund their new wheels, and let them know that the cost of any accidents will be covered by them. This may encourage them to drive a little more carefully.

Boys vs girls
Finally, I was once asked if you should differentiate between boys and girls. One mom said that her daughter needed more money because she needed more clothes than her brother. Huh? No mom, she wanted more clothes than her brother! The costs of both male and female children usually even out. Boys may buy expensive computer games or sports equipment (yes, girls can do this too) while girls may spend more on cosmetics and clothes. If you have two teenaged children they should get the same amount of money (obviously appropriate to their age).

The bottom line is that if you don’t give your children a budget to work with, you will be bullied into poverty. Teenagers are great sales people, so you need all the help you can get to keep their spending under control, and a monthly budget is an effective way to manage these costs. And while you are on the subject of budgets, do one for yourself too!