Helping your teen manage their summer earnings
Adèle Manseau | Desjardins Group
Summer has come to an end, and so has your teen's summer job. That job gave them money to spend on entertainment and treats and might have also gone toward paying for activities throughout the year. But now that those paycheques have stopped, how do you balance the family budget?
Mélanie D'Auteuil, a budget counselor at Association coopérative d'économie familiale (ACEF) Rive-Sud de Québec, gives us the essentials of sound budget management, which you can share with your teen.
“Parents are kids' first role models when it comes to spending. Depending on their spending habits, chances are good that their kids will adopt the same style. Parents can do a lot to help their children develop financial awareness by talking to them about budgeting.”
To kick off the conversation at home, here's a 3-step budgeting overview:
1. Income
Your teen's summer job had many benefits. They discovered the joys of earning an “official” income for the hours they worked, which often creates a sense of independence and excitement. The future is full of possibility!
As D'Auteuil says, you don't need to earn a lot in order to budget. Total up their earnings with them. They'll see the results of their hard work. And beyond introducing them to budgeting, they get to see that they've already taken their first steps into the labour force.
2. Expenses
If they haven't already, encourage your child to record their expenses over the last few months—entertainment, clothes, meals out and so on. They might be surprised by how much it comes to, because they probably haven't been keeping track of every
expenditure.
The money they've spent will orient the discussion around their spending. Were all the expenditures necessary? Which ones were essential? Were there some that could have been prioritized? Do they even know where their money went?
These questions also apply to expenses in the coming months so they can properly evaluate and plan for them. For example, if they've made financial commitments, like covering the monthly bill on the cellphone you bought for them or paying for driving lessons, they'll need to plan for those expenses.
Depending on how much financial leeway they have, you can help them make the right decisions so they're able to stay within their means. They'll have to make some choices—they can't buy everything they want!
3. Savings
Your teen is dealing with their first budget: for the first time, they're recording their income and expenses and finding out how much financial wiggle room they have.
Drawing up a budget helps them meet their financial obligations and set aside money for activities and entertainment. And there should also be room for savings.
How do they want to use their money over time? Do they have any medium-term goals? What are they saving for and how much should they save?
D'Auteuil says that that getting your teen to set aside money for a specific goal is a great way to encourage them to start saving. For a hands-on savings tool, see My Savings Plan.
“Every young person has their own personality and you know your child better than anyone. It's worth talking to them about personal finance and giving them the chance to learn the basics. You'll help them see that it's the starting point for achieving their dreams and meeting their commitments,” says D'Auteuil.
Want to give them something concrete? There's lots of free training in many areas of Quebec that's designed to help your teenager learn about finances. Go to Personal Finance: I'm in Charge - An educational program for young adults.
See also the article Does your teen talk to you about money?