Teens and Money

When I lived in Japan, I was the only shopper at the local grocery store who needed a basket with wheels to carry my groceries to the register.  My Japanese neighbors generally arrived at the register with just enough groceries to partially fill a small cloth grocery sack, which they brought with them to the store.

I quickly learned that while I was buying food for the whole week, my fellow shoppers were only purchasing what they needed for that day—and usually from a short, pre-written list.

On the one hand, this practice signified a cultural appetite for very fresh food.  It was also, however, a sign of the pervasive Japanese ethic of frugality.  By shopping for a day’s worth of food at a time they avoided the waste of spoilage and impulse buying.   When I lived in Japan the national average for saved income was around 30% (this has slipped in recent years).  I, on the other hand, was living and working in Japan to pay off debt.  So I had much to learn from my Japanese hosts, and learn I did.  In two years, I paid off my sizable debt, learned how to live within my means, and began saving money.

Nearly two decades later, I still wonder why it only took me only two years in Japan to learn basic lessons about money that I hadn’t learned in the previous 29 years.  The truth, as I’ve learned from my personal life and from working with many young people, is that this is largely a cultural issue.   Just as the Japanese grow up in a culture that favors almost compulsive levels of saving (though this is beginning to change for the worse), we Americans grow up in a culture that encourages spending and debt (though this is beginning to change for the better).

What this means is that without conscious intervention, our children are likely to replicate bad financial habits that are culturally pervasive in the US and, arguably, are the cause of our current economic crisis.  Even if you are a fiscally responsible adult, don’t expect that ethic or skill set to automatically transfer to your children.   Culture is too powerful a force to overcome by passive example.   We have to actively teach our children, teens, and young adults financial literacy and discipline.  If we don’t, we’ll be taking care of them when we’re old, instead of the other way around!

A few ways to help your child, teen, or young adult develop fiscal literacy and skill include:

Allowance:  Offer a predictable allowance and paid it on time like a salary.  Be clear about what this is for, e.g. entertainment, gas, discretionary expenses.  Help your child create a budget based on priorities and the amount of her allowance.  Include savings goals as a part of the budgeting strategy if she has her eye on larger purchases.

No Bailouts:  If your child overspends, don’t bail her out with more money.  It’s better for her to experience the consequences of overspending while the stakes are relatively low.

A Debit Card*: Prepaid debit cards mean that when the money’s gone, the money’s gone.  They reduce the debt risk and interest of credit, and they give your child a way to review and assess spending habits.

Real Time Tracking and Feedback:  Be sure that you have access to your child’s, teens, or young adult’s (if you’re providing the cash) debit-card reports so that you can track expenditures and discuss any that are of concern.  Real-time tracking will provide lots of teachable moments.

Conversation:  Growing up, I was taught that it was impolite to talk about money.  In retrospect, I realize that financial reticence is often less a matter of etiquette than of awkwardness.  Until parents are comfortable discussing finances with each other, it can be tough (and counterproductive) to discuss the subject with children.  But rich, educated, open conversations about money can save your children lots of future grief.
*An interesting resource for using debit cards to educate children: www.billmyparents.com