According to a 2014 University of Michigan Study, the average high school senior—who may already be juggling a part-time job in addition to their schoolwork—knows little about saving or proper money management.
In fact, they spend most of what they earn on entertainment and clothing, a pretty bad precedent for young adults heading off to college and the working world. At that age, the money young teens earn in the summer usually comes from parents for household chores like mowing the lawn. Most parents never have a discussion with their kids about how to spend or save that money. Young teens generally don’t think about whether something is a “want” or a “need”, it is typically a want, which would be spent on a game, candy or comics.
If you’re the parent of a 12-14-year-old, that might give you pause or provide a great opportunity to make a difference. Consider using this summer to stop your child’s bad money habits before they kick in. After all, even though most middle schoolers are shy of legal working age, many begin to work at odd jobs that are starting to put money in their pockets you don’t see.
Consider these steps for an informal summer money curriculum:
Introduce—or reinforce—the “Needs vs. Wants” talk.
Maybe your child has a spending goal for the summer—new clothes, maybe a smartphone. It’s all about intelligent money management, even if the goal is somewhat short-term. The “needs vs. wants” talk is all about delayed gratification, the foundational behavior of healthy money management. Link it to smart shopping, encouraging the teen to price-compare purchases, gather coupons and come up with other ways to save in print and online. It’s also not a bad idea to let your child start suggesting thoughtful purchases when grocery shopping for your family. Before he or she can drive, you’ll have a chance to discuss choices and spending while you’re both in the store.
If they’re not working, give them an opportunity to earn.
If your middle schooler isn’t picking up a few dollars babysitting or doing chores, come up with an earning opportunity for the summer. It could mean cleaning out the basement or garage or a project around the house that they can handle. It will provide you both with an opportunity to talk about what he or she will do with that extra income. If your child has an entrepreneurial spirit, encourage converting a hobby into a summer business. If they show empathy to help others, suggest they donate their time to help elderly neighbors with simple yard work.
Introduce the ‘bucket” system.
It’s hard to know what to save, spend, give or invest without a system. That’s as true for adults as it is for kids. The “50-25-25” rule refers to setting aside 50 percent for everyday, non-discretionary expenses like school lunches or transportation, another 25 percent for savings and the remainder for discretionary purchases, better known as the latest smartphone your young teen says she or he can’t live without. If your middle schooler still doesn’t have a banking relationship, it’s a good time to get started. A custodial checking account will allow you to see how your child is handling money and debit cards are a reliable means of tracking every cent.
Also, for savings, you’ll have the opportunity to introduce him or her to price-comparing accounts for features, savings rates and usage fees. Banking relationships should be treated like any smart purchase.
Discuss making a budget.
Remind your children that if they want to maximize any part of the 50-25-25 system, they need to learn how to find value and stick to a budget. Most importantly, they need to know how to track their spending so they can stay within a budget. The number of mobile apps that allow people young and old to track their spending grows each year. Whether it’s pen and paper or technology, let the teen find a budgeting solution they like. They’ll be more inclined to use it and stick to a budget.
Consider being more transparent about your finances.
There’s no single right answer to the question of how much you should tell your children about your own finances, but keep in mind that they learn by both good and bad examples. It’s important for young teens to know that anyone—even the most important adults in their lives—can make a great financial decision or a mistake. Speak openly about money, with the appropriate safeguards for personal and family privacy. Find a way to make your personal experiences part of the summer money conversation.
Bottom line: Middle schoolers may grumble they don’t have access to the car keys or the cool clothes and technology that the older kids do. But they do have something more valuable—time to learn critical lessons about money. Use this summer to build their financial knowledge for a lifetime.
Nathaniel Sillin directs Visa’s financial education programs.