It happens so fast you could miss it. But in their teens, kids need to start moving from thinking about money in small amounts (weekly) to larger amounts (monthly). “They should start getting more money for longer periods of time, but now they also need to start taking personal responsibility for some spending categories themselves,” says Certified Financial Planner Trevor Van Nest. So if you were giving them $20 a week, you may want to give them $80 monthly plus a bit extra for new teen expenses like music subscriptions and clothes.
This is also a time when many teens will get a part-time job. But whether it’s summers at the local fair or a few shifts a week at McDonald’s, you can help them out by talking them through concepts like minimum wage and negotiating hours of work so they maintain a work-school balance. Most teens will also be anxious to know why money is coming off their paycheque for taxes, employment insurance and the Canada Pension Plan. “Learning that earning $10 an hour doesn’t mean they get to keep $10 an hour is eye-opening for them,” says author Kira Vermond. This is also a good time to help them get their own debit card.
And as they start bringing in a bit of money of their own, you’ll also want to discuss how they can start participating in saving for some bigger things in their life. “Ask them if they want to go on that trip to Europe with their high school class in two years,” says Kelley Keehn, author of The Prosperity Factor for Kids. “If so, how will they pay for it?” This is also a good time to show them you’ll do your part if they do theirs. As one of the respondents from our MoneySense Kids and Money Survey said, “I taught my kids the importance of saving by matching the amount of money they saved for larger items and longer-term savings, up to $500 annually.” Van Nest is a big fan of so-called “carrots” like this. “Anything that gets them to want to earn or save more of their money is welcome at this age.”
You can do more. One of our survey respondents ties special allowance increases to his child’s initiative in researching particular investments, or in learning financial literacy terms like down payments on a house, mortgages, inflation, stocks and bonds. “They’re at an age when understanding key concepts like compound interest will make a huge difference,” agrees Vermond, who also finds it key to show kids the compounding money charts where over time they’ll see huge increases in their money. Or, simply show them your credit card statement so they can see just how much that family trip to Florida really cost.
Don’t make the mistake of overlooking the small stuff—like helping them apply for college scholarships they may be eligible for. “Kids often don’t realize that this type of free money is available or that the application process can be fairly easy,” says Heather Franklin, a fee-for-service advisor in Toronto. “Setting aside some time to help them fill out applications builds a skill they’ll need in university when they’ll have to fill in a lot of these forms themselves.” Everyone likes money for nothing and teens are no different. If they learn the basics of investing at 15, even if they make some mistakes, they’ll be miles ahead in their finances at age 30.
Here are smart money moves you can show your kid right now:
❏ Give a monthly allowance instead of a weekly one
It will help them budget for longer periods of time.
❏ Start matching savings
You can encourage a good habit by matching them dollar for dollar to an annual limit.
❏ Have a weekly family money meeting
Encourage your kids to participate in decisions about how to spend the family money for vacations, vehicles and giving. Empower your kids by having them think through bigger decisions with their money.
❏ Put them to work
Whether it’s babysitting, tutoring or flipping burgers, a part-time job will give them valuable experience along with that paycheque.
❏ Set a financial goal
Saving* is easier with a target in mind. Show them how setting aside small amounts can help them pay for more distant goals like school trips, post-secondary studies or a used car.
❏ Give them a basic smartphone
Pay for a basic talk-and-text package, but show them the monthly bill so they understand it’s an ongoing expense.
❏ Share some household skills
Have your kids help you fix their bike, paint a fence or fix a faucet, and explain how such skills save the family money.
❏ Show them how their RESP is invested
This will give you the chance to explain how financial instruments like exchange-traded funds (ETFs), mutual funds and stocks work and allow them to watch their money grow.
❏ Decode their first paycheque
Explain deductions such as taxes, pensions and Employment Insurance. While you’re at it, consider showing them your paycheque.
❏ Get them an ATM card*
Show them how it works, and how to protect themselves from fraud and phishing schemes.