The Money Couple Minute:
Slash the Cash - Three Ways to Control Your Teenager’s Spending
Teens know a lot about money. At least, they know a lot about spending money. But few people know how to help their teenagers manage their finances, particularly when it comes to spending.
Last year young shoppers spent over $170 billion - double the amount just 10 years earlier on clothing, food, music, and technology (reported by 20/20). If that sounds outrageous to you, consider these facts:
- According to the JumpStart Coalition for Personal Financial Literacy, nearly a third of high school seniors reported having a credit card of their own or one co-signed by a parent.
- In 2010 alone, more than 110,000 Americans under age 25 filed for personal bankruptcy. (Elizabeth Warren, Professor of Law at Harvard Law School).
- 78% of college students have credit cards, according to student loan maker Nellie Mae. The typical student carries a balance of $3,200. One out of ten college students carries a balance of more than $7,800.
Here are three ways to control your teenager’s spending:
- Teach your teen who they are - Determine your teen’s Money Personality: Saver, Spender, Risk Taker, Security Seeker, or Flyer. If your child is a “Spender” or a “Risk Taker” watch out...teach them the difference between a “need” and a “want”. Just recently a mom told us about how her teenager said she “needed” new golf clubs. The mom responded, “Let’s determine if this is a need or a want”. The teen said, “A want.” The mom said, “Great, let’s figure out how you can save for those clubs”.
- Get your teen a credit card - It’s easy to assume that the best way to avoid all the problems that come with credit cards is to make sure your teenager doesn’t have one. But we also know that most teenagers have never been taught how to use a credit card. If you don’t get them a credit card and teach them how to manage it now - it will spell disaster for them in the future!! Teaching your teen how to use a credit card responsibly, teaching them how interest works, and teaching them the importance of paying it off every month will help your teenager avoid the credit card trap of minimum payments and mounting debt in the future.
- No privacy - Just like we shouldn’t let our teens eat whatever they want, hang out with whoever they want, or study when they feel like it, we shouldn’t give them the ability to spend freely. In order to raise consumer conscious adults you have to raise consumer conscious teens. As a parent you have to stay engaged with their purchases. Teens need accountability when spending money whether it is the money they have earned or you have given them. In other words implement, the “No privacy” rule while under your roof.
For more information and to download “Got Plastic”, click here.
Make It Happen!Scott and Bethany Palmer
The Money Couple
Money Huddle Tip: At your next Money Huddle, go through these three steps and determine one action step to apply to your teen's spending.
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