Adolescents and Allowances: Guiding your Young Adult Through the Personal Finance Maze

Adolescence is a tricky period for young people…and their parents. There are many transitions to be made between childhood and adulthood. Responsibility is both craved and resisted, and independence turns out not to be all that was expected. One important aspect of taking one’s place in the adult world involves how money is handled.

The Art of Negotiation

Negotiating with a teenager is never easy, but you and your kids need to do it. As you lead them towards financial independence, it will help if you discuss at each stage how much oversight you will have. This will especially apply to any allowance you may give, and any job income they may have. If you don’t reach a compromise, then everything you do will be seen as unwarranted interference.

One way to retain access is to offer an incentive in the form of matched savings, giving you the right to look at their accounts.

The Art of the Budget

An allowance is a great way to discover the importance of budgeting. Sit down and list all the things they want to spend money on. Stress the importance of including savings among the priorities. Together agree on a monthly amount that you will contribute.

Having set a budget, you will have to stick firmly to your guns and refuse any and every request for special advances. Learning to live by a budget involves learning that you cannot spend the same money twice.

The Art of Work

Few things teach adolescents about money management better than having a job and understanding the relationship between effort and income. Encourage them to take opportunities to work if they come along. Avoid the temptation to catch them in a “benefits trap” by reducing their allowance if they start to earn.

Employers may want to pay wages into a checking account, so this is probably the best time to open one and learn how to control it.

The Art of Staying Safe

With so many transactions taking place online, your growing kids need your help to understand the dangers they face in the financial jungle. Among other things, they need to be educated about:

Debt. Although in most circumstances, minors cannot be held responsible for debts or enter a contract for credit, they need to know in advance about the temptations that they may fall into as adults. If you are in the position of needing a personal loan, talk them through the process as you look for the best conditions, for example on this site.

Identity Theft. Young people can be very relaxed about the information they leave about themselves on social media. Talk about the risks involved, and how identity theft can cause them financial problems well into the future.

Growing Up

Nobody said that growing up was easy. There will inevitably be rows and tears involved. But responsible parents will find ways to stay on hand for their kids as they discover, among all the other challenges of adulthood, how best to manage their money.

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