Any parent attempting to broach a discussion about building wealth with a teenager knows what to expect—exaggerated eye rolls and pained expressions of boredom. Learning to save up for something big like a house, let alone retirement, will simply never be on a teen’s radar. But that doesn’t mean you can’t teach teens valuable lessons about saving and spending that will lay the foundation for sound habits later in life. The key is helping them set attainable financial goals and a plan to get there, so that they can learn how to make their money grow.
“Have teenagers think about something they want to save the money for,” says Karin Mizgala, co-founder and CEO of Money Coaches Canada. “That way you’re making them think about how they organize themselves.” Doing this helps them balance their current and future wants by forcing them to make tough decisions about their cash flow. It also teaches them to eschew instant gratification in favour of patience—a key determinant for building wealth later on. So don’t cave and just give your teen the money if he or she winds up falling short of savings goal, Mizgala stresses.
Whether your teen’s goal is saving up for a video game or a portion of future university expenses, a great way to keep them on track is to encourage them to regularly set aside a portion of their allowance or income received from a part-time job—say, 10% to 20%. “The habit just spills over when they start working full-time in their 20s,” says Tom Feigs, a money coach in Calgary.
Just don’t make the mistake of second guessing your teen’s financial choices provided they’re staying within their means, Feigs adds. “A parent will always have a bias about what their teen spends their money on. But never mix money management coaching with discipline or use it to correct social behaviour.”
Lessons I Learned In My Teens
Most Canadians couldn’t wait for this year’s punishing winter to come to an end, but not Curtis Gangl. The 15-year-old Haligonian made a killing shovelling his parents’ sprawling driveway. These days he’s mowing lawns, and all the extra chore money is helping him meet a savings goal he set for himself.
Earlier this year, Curtis hatched an agreement with his parents to attend a school trip to Toronto provided he came up with a third of the funds. “I’ve been saving up so I can go to Canada’s Wonderland and a Blue Jays game,” he says. “I’ll also want to get pizza and stuff.”
Generally speaking, Curtis has always been a good saver, his mom Alison notes. “I think getting him his own bank account helped. Once he puts money in he never takes it out. He doesn’t want to see the balance go down.”
While Curtis likes that his parents don’t interfere with his money, he says their lessons have stuck with him. “I don’t spend on things I don’t need, like upgrading to a new phone.” He also has some ulterior motives. “My brother has more money than me and I hate it. I want to save more so I can rub it in his face.”