Before you can help your teen make wise money decisions, it’s useful to know how adolescents receive money and how they spend money.
Teens make money in a variety of ways depending on their circumstances. According to a 2012 survey by the American Institute of Certified Public Accountants, 61% of parents give their kids allowances, with most starting at around 8 years of age. The average allowance over all age groups is around $65 per month, or about $16 a week. * Teens also seek employment for money. According to the U.S. Bureau of Labor Statistics, in July 2014 51.9% of 16 to 24 year olds were employed. ** In addition, adolescents tend to receive monetary gifts on birthdays, during the holidays, and at graduation.
So how are teens spending their money? According to Piper Jaffray’s semiannual report on teen spending, teens spend the majority of their dollars on food (most notably Starbucks) and clothing, and those two categories are tied for the first time in the survey’s history. Teens are also spending money on accessories/personal care, shoes, a vehicle, electronics, video games, music/movies, events, and books/magazines. ***
With teens having a considerable amount of spending power and being heavily targeted by marketers, it’s more important than ever to encourage good financial decisions. Here are just a few tips to help your teen make smart money choices. ****
- Help them set financial goals such as saving money for tuition or a car.
- Let your teenager be responsible for some of their own spending and saving decisions. For example, let them pay for their own gas or insurance for their car.
- Teach them the risk of certain financial decisions. For instance, they should understand the consequences of spending too much on a credit card and not being able to pay their bill in full. Show them how interest works and how it can increase the purchase cost of an item.
- Teach by example. Include your teen in family financial decisions and let them know where you’ve made mistakes in the past.
Learning how to spend money wisely is a process and it will inevitably involve a few setbacks. With a little patience, you and your teen can work together to make successful financial choices.
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Categories: Kids and Money, Students