- The Washington Times - Saturday, August 21, 2004

Teenagers who work part time can feel entitled to spend their money any way they choose, but a little guidance from their parents can go a long way, says Neale S. Godfrey, author of several books about children and financial literacy.

“Don’t let them learn by trial and error because they’re just going to end up spending it all,” says Ms. Godfrey, whose most recent book is “Money Still Doesn’t Grow on Trees: A Parent’s Guide to Raising Financially Responsible Teenagers and Younger Adults.”

Ms. Godfrey recommends that parents sit down with their teens and work out a basic budget that includes goals for earning, spending, saving and giving.

She says 90 percent of the earned money should fall in the spending and saving categories and 10 percent should fall in the giving category.

“It should be a mandate to give to charity,” Ms. Godfrey says. “You have to teach them how to be a good citizen and get out of the ‘me, me, me’ mode.”

Of the 90 percent left over, a third should go toward spending on items that provide instant gratification (movies or food), a third on savings with medium-term goals (clothing or electronics), and the last third toward savings with long-term goals (car or college), she says.

“They are learning about earning, spending, saving and giving. These are skills they will need in the real world throughout their lives,” Ms. Godfrey says.

Of course, telling teens how to spend their money can be tricky, she says.

“You have to be firm,” Ms. Godfrey says: “‘This is my house. These are my rules.’”

When teens want to buy something and they need their parents’ financial help to buy it, that’s the most effective time for parents to talk to teens about money management, says Lewis Mandell, a professor of finance at the University at Buffalo’s School of Management in Buffalo, N.Y.

“If you can dangle something over their head, they’re more likely to listen,” says Mr. Mandell, who has a doctorate in economics. “For example, if they want to buy a car and you say you’ll pay for the insurance.”

If the teens still aren’t listening, it’s time to shave off privileges, such as watching television or using the Internet, Ms. Godfrey says.

“But let’s face it, you’re going to fight with your teens, and it’s going to be difficult to enforce any rules,” she says.

Making teens quit their jobs because they spend their money unwisely is not a good solution, Ms. Godfrey says. Quitting will only make them depend more on their parents for money, and they will miss out on learning about earning, spending, saving and giving, she says.

“And they can still spend your [allowance] money anyway they want. … There’s no way to control teens,” Ms. Godfrey says.

While parents can help guide their teens on money-management matters, very few parents expect their high schoolers to contribute directly to major household expenses, says Jeylan Mortimer, author of “Working and Growing Up in America.”

“Only a very small minority share it with their parents,” says Ms. Mortimer, a professor of sociology at the University of Minnesota. “But parents are pleased when the extra money helps them indirectly — when teenagers start buying their school lunches and paying for their own clothes.”

Ms. Godfrey says that when teenagers start working, it’s a good time for parents to start decreasing the youngsters’ allowance.

“If you don’t wean them off their allowance, you’re telling them there is an entitlement program,” she says.

Ms. Godfrey says the “weaning” should start with the teen’s first job, for example baby-sitting or raking leaves. Teens should start picking up the tab for some of their expenses each week, such as movie tickets and snacks, she says.

If teens only work in the summer, they should save so they have money for the rest of the year, Ms. Godfrey says. This will teach them financial planning on a small scale, she says.

Parents also should teach their children to become smart consumers, Ms. Godfrey says. Part of financial planning is to catch sales and get more bang for your buck, she says.

“A good incentive for the child is if you say, ‘If you make X amount of savings, I am willing to split the cost with you,’” Ms. Godfrey says. “It’s an empowering rather than a punitive message, and that’s much more effective.”

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