As long as your teen's "oval office" is under your roof, you can VETO spending from their account.
Is the money your teen earns babysitting, flipping burgers, or selling fish food and aquariums 100% theirs to spend as they wish?
Harsh? Nah. One mom recently asked us, “If our kid is putting their time and effort into the job why should we get the last word on how they spend it?”
Because you’re still at the front of the class, teaching them to make wise financial choices.
What you teach them now will be the basis for their success or struggle in the future. It’s worth reminding yourself (and them), the pain of slinging burgers will pale in comparison to the crushing pinch of debt.
Debt is like gaining a few extra pounds — it goes on easily, but it is hard to get rid of.
You hold VETO power over their spending decisions as long as their oval office is still under your roof. You are their Cabinet and primary voter, even if their checking account has their name on it and it is money they earned for themselves.
A teen with a job is something to be very proud of — for them and for you.
Child Trends Data Bank reports in 2014, 49% of all youth aged 16-24 were employed: 20% of all female high school students had a job and 17% of all males.
So not every child is balancing work and studies. We applaud those that are.
Money translates to freedom for most independent-minded teenagers, so there is a lot of emotion behind conversations with them about money.
Value their efforts and their desire to use “his” or “her” money as “he” or “she” wants. But as long as they are at home, living rent free, you have a huge say in how they spend their cash. Your parenting role these last few years matters greatly (even though they act like they aren’t listening).
Try these 4 tips to help your teen better understand money in those final years at home:
1. Celebrate their commitment and remind them of yours.
Difficult conversations seem to go better when your heart is in the right place (and when your stomachs are full). If you find yourself fighting with your teen about their money, stop.
Take a step back. Start the discussion by celebrating and honoring the fact that they worked a job while many of their peers did not. Avoid talking about money when you’re both tired or stressed.
Sometimes the conversation works better on neutral ground. So you could take them out to a celebratory meal – a burger they don’t have to add the fries to. Or offer to help them get those new shoes they’ve been eyeing at work. Use this time to celebrate their commitment to getting a head start in life. You may also take this time to remind them of your commitment to them – rides to work, a car to drive, insurance paid for, clean clothes to wear to work, and a nice place to come home to after their shift is done.
Be considerate. This isn’t about you, but it is a good time to remind both parties that you’re in this together.
2. Remember the 3 S’s — save, share, spend.
It can be helpful to think of money going into three separate categories — save, share, and spend.
- Save: Not every child is wired to save, and that’s okay. But now is a good time to help them see the discipline and reward of saving. Delayed gratification is hard for adults so it’s an especially powerful lesson to teach this “instant” generation. Encourage your teen to pick a “save for” goal and write it down. How much is the total amount? How many hours at work will it take? Is there a less expensive version of the same thing? Then help them save some of each paycheck to see the money they worked hard to get, work hard for them.
- Share: Teaching your teen to share is a great way to plug into their passion for others or causes. Do they want to be a part of helping fund a sports camp for disabled kids, or clean water for people in another part of the world? Do they want to give it to a person they see outside the grocery store with a cardboard sign? Whatever the case, encourage their generosity and teach them sharing matters.
- Spend : This one seems easy, but not for every child. Some kids more bent on saving can experience anxiety about spending. They worry that a rainy day may be right around the corner. Other kiddos — not a problem, they think, “I’ll take two.” Help your teen have a plan and some boundaries and then enjoy the fruits of their labor.
3. Discuss future expenses.
We’re guessing your teen knows how to use the Internet. Have them research how much it currently costs to pay for: car insurance, a car, rent, cell phone, or utilities.
Maybe if they understand how expensive life is beyond your front door, they will better understand your hesitancy for them to spend every penny they make now.
4. Save smart.
If your teen is college-bound, we would recommend transferring or spending assets in their name the summer before your teen’s senior year.
We don’t want you to pull your hair out, but just when you get them convinced to save some of their earnings, you have to get rid of it all? Not quite. You just need to be aware of what leaving those funds in their name means to their college aide package.
Not all assets are given the same weight when applying for the Free Application for Student Aid Form (FAFSA). Jay Murray, president of Solutions for Tuition says, “Student assets are assessed at 20% meaning that for every dollar in an account in a student’s name, the government will subtract 20 cents from the student’s aid package. This starts with need-based grants. Parental assets are assessed at (up to) 5.6%.”
One exception is any monies in a 529 plan, which are assessed at parental rates regardless of whose name they are under.
Encouraging your teen to save is important. So don’t let this FAFSA-talk discourage you. But as they age, be aware of where their hard-earned cash is going. They could put funds in a retirement account (retirement accounts are not assessed in the FAFSA process) or buy a computer for college, paying down their account, but securing a useful tool for their next 4-5 years.
(Financial Aid for college is tricky and there are lots of great resources online and in books. We found The Complete Idiot’s Guide to Financial Aid for College helpful. There is a free download PDF version of the book that might be worth your time.)
At the end of the day, you don’t want to spend your last few years fighting with your teenager about their spending.
They are working a job, which is a victory in and of itself. But don’t shy away from putting your foot down when they want to spend a huge chunk of their entire account on something frivolous, fleeting, detrimentally permanent, or dangerous.
They are so close to going it on their own, but until they do, you have VETO power. Use it wisely.
Scott & Bethany Palmer, The Money Couple, are financial planners, authors, and speakers who help couples tackle money issues in their relationship. Pick up a few more tips in our free, e-book, Checklist for Raising a Money Genius Teen. To better understand your approach and your teen’s approach to money take our FREE online Money Personality Assessment.