4 ways to financially empower your teen
1. Teenage passbook
If the child has entered adolescence and is requesting an increase in the allowance, ask him to create and maintain an account book in which he records his monthly expenses under various headings such as dining out, entertainment, gadgets, accessories, etc. If he’s comfortable using an app for this, encourage him. After 3-4 months, sit down with him to analyze his spending habits and total monthly needs. Let him figure out where he spends the most, where it can be avoided, and how much he is able to save. Allow him to state his case for the raise he wants and if the argument is valid, allow it. If the request is out of your budget or unreasonably high, set your own limit explaining why you are reducing it.
In both cases, make the account book conditional on the payment of the allowance each month. This will not only make him prioritize his expenses, but also allocate a specified amount for different heads, a budgeting habit that will serve him well as an adult.
2. Do not dictate or interfere
Once you give the teenager the allowance, don’t manage or dictate their spending or force savings. Give him the freedom to spend as he pleases and, even if the choices seem wrong or extravagant to you, do not criticize him right away. Make suggestions later without overwhelming the child. On the other hand, if the teenager runs out of money in the middle of the month, be firm about not supplementing it. Let him wait for next month’s allowance. This will teach him how to manage a given amount in the specified period.
3. Borrowing and Lending Rules
If your teen has a habit of helping friends by lending money without worrying about getting it back, deduct the amount from their monthly allowance until they get it back. If this affects his purchasing power, he will learn to value it. If, on the contrary, he begins to borrow from his friends, find out if he has run out of money or if his needs have increased. Increase the allowance, if necessary.
4. Value for Money
One of the best ways to make a child appreciate money is to make it work for them. Don’t pay him for simple chores around the house or chores that should be part of his daily routine anyway. Instead, choose activities that involve slightly harder physical or mental work. Depending on the age of the child, these tasks may involve washing the car, picking up groceries at the market, tutoring neighborhood children, or even planning a vacation. The greater the effort, the more he will value his earnings and spend them prudently without being reckless or extravagant.
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Disclaimer: Advice in this column is not from a licensed healthcare professional and should not be construed as psychological advice, therapy, or medical advice. ET Wealth and the author will not be responsible for the outcome of any suggestions made in the column.