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Teaching your teenager better money management

Would you trust your teenager to live on a budget? As your children grow up and enter the adult world, teaching them how to better manage money will help equip them (and you) for the journey ahead.

Parents play a critical role in influencing their children’s financial behaviour and this sense of duty can weigh heavily on their shoulders. According to a survey1 by the Financial Planning Association of Australia, 95 per cent of parents said they felt most responsible for shaping the next generation’s perspective on money.

However, feeling responsible doesn’t always translate into taking action. The same study shows that two thirds (68 per cent) of parents are reluctant to discuss money with their kids.

So how should you approach talking to teens about this important topic?

Discuss attitudes as well as tactics

Teaching your children to take a measured approach to money is just as important as getting them set up with a savings account – and the younger you can get started, the better.

Justin Chandler, Principal and Senior Financial Adviser at Chandler Private Wealth says, “Many kids want instant gratification, i.e. what can I have right now?

“This is a perfectly natural frame of mind for a young person, but once you teach your children about delayed gratification – saving and waiting to get something even better – you will see a shift in how they treat their money,” he says.

Saving, spending and budgeting

In an age of ‘invisible money’ where most financial transactions take place over card or online, making sure your teen views their savings as meaningful, valuable cash is very important.

“A great way to encourage teenagers to save and budget,” says Chandler, “Is to make the most of the flexibility you can now have with online accounts. I’d recommend setting up multiple accounts to separate savings between long-term and short-term goals.

For example, Chandler explains, you might have one account where you save for a holiday or a car, and another for short-term spending money or buying gifts for others.

95 per cent of parents say they felt most responsible for shaping the next generation’s perspective on money, yet 68 per cent are reluctant to discuss money with their kids.

A teenager’s allowance

The average allowance for a 14-to 18-year-old in Australia currently sits at $17.80 per week2. Not only is this a welcome injection to their bank accounts, but an important opportunity to learn about money.

As Chandler advises, “It’s a good idea to introduce a bit of planning and structure around your children’s allowance.”

Rather than simply handing over the cash, sit down with your child to discuss their short and long-term savings goals. Encourage them to work out how many weeks it will take to reach their goal, factoring in any other expenses that might be on the horizon, like birthday presents or new clothes for a party.

“Simulating real-life earning, saving and budgeting is a great way forward,” suggests Chandler.

“I usually encourage clients to only pay their kids’ allowance when they have done their set jobs for the week, like washing the car or tidying the house. This way, you introduce the idea of earning money through valuable contribution, rather than simply being handed it on a weekly basis.”

Earning extra income

The best way for your child to learn about the world of work is to be immersed in it. An after-school or weekend job will not only provide a bit of extra income, but some vital lessons about diligence, punctuality and teamwork.

But, before your child finds their after-school job, sit down with them to make sure they’re comfortable with how they’ll juggle it alongside their other commitments.

Setting a good example

We know that children learn financial lessons from their parents, so make sure you’re setting a good example through your own money management.

“You can set a good example by only using credit cards when you can afford to pay them off in full each month, and always having a cash buffer for emergencies so you don’t need credit,” advises Chandler.

“Consider only borrowing money to buy assets that increase in value like property and shares, not for cars or holidays.”

With this mind, chatting to a financial adviser may help to build your own financial literacy and confidence, and set a strong example to your children.

Colonial First State Investments Limited ABN 98 002 348 352, AFSL 232468 (Colonial First State) is the issuer of the FirstChoice range of super and pension products from the Colonial First State FirstChoice Superannuation Trust ABN 26 458 298 557. Colonial First State also issues interests in products made available under FirstChoice Investments and FirstChoice Wholesale Investments. This document may include general advice but does not take into account your individual objectives, financial situation or needs. You should read the relevant Product Disclosure Statement (PDS) and Financial Services Guide (FSG) carefully, assess whether the information is appropriate for you, and consider talking to a financial adviser before making an investment decision. The PDS and FSG can be obtained from or by calling us on 13 13 36.

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