Now that Junior has a job, it’s time to have a little chat about what he’ll do with the money. From saving to spending wisely, if you don’t talk about it, you can’t expect your young’un to intuitively know how money works.
How much does your kid plan to save? For those who are working their first job cutting lawns or delivery newspapers, the Save 10% Rule will be enough. Resist the urge to insist that your child save 50% of their income. Do you save 50% of your income? (I didn’t think so.)
For kids who will be heading off to university shortly, saving for tuition may be top of mind. Have the discussion about a reasonable amount to save to reach their goal. If for example, they want to have $5,000 saved, and they have two summers – 16 weeks – to save, they’ll have to tuck away 5000 ÷ 16 = $312.50 a week. Can’t be done? Then Baby Girl will have to extend how long she’s saving, or find a way to earn more money.
Don’t set the savings bar too high. Sure you’re paying for all your kids’ basics needs right now. But if they’re working hard, they’ll want to enjoy some of the things money can buy. And they should. There’s nothing more de-motivating than having no balance and not enjoying the fruits of one’s labour. Saving some is important. So is spending some. Which brings us to …
Develop smart shopping skills
Comparison-shopping is key to getting the most for every dollar you earn. So is understanding the concept of relative value – how many hours you have to work to pay for whatever it is you’re thinking of buying. If your kid is determined to get the latest cell phone ($400) and has a job making minimum wage ($10/hr.) then he’ll have to work for 40+ hours (don’t forget to talk about income taxes and sales taxes) to get that phone. Is it worth it?
If you think your kid is blowing her money on crap, ask her to keep a spending journal showing exactly where her money is going. She may not even realize how much she’s spending on things like snacks and entertainment. This can be a great way to put her spending habits into perspective. Combine that with a little chat about her goals for a double whammy: now she’ll know where she really wants to put her money, and she’ll know where she can cut her spending to get what she really wants.
Some kids are natural born savers. Others, not so much. If you want your child to develop the skills for using their money to their best advantage – instead of it slipping through their fingers like so much sand – it’s time for a talk. Not a heavy-duty lecture. Not a rant. Not a series of rules. A talk: a sharing of ideas and discussion about life, money, and how to have what you really, really want from both.