They've Earned It, Now What?

The snowstorm last week gave the young teenagers on my block the opportunity to earn quite a few dollars. One happily reported that their "team" earned $270 shoveling eight driveways. Needless to say, they were pleased.

I asked one of the 11 year olds what he'd do with his portion of the money and he said he'd spend it on some new video games. I would imagine that this is a typical answer. Youth today enjoy a lot of freedom in choosing what to do with their vast amounts of cash. National statistics show that in 2001 youth ages 9 - 14 spent $260 billion (roughly $84/week - $57 of their own and $27 from parents). Sometimes parents aren't sure how to help youth manage all the cash they have.

I continued to visit with this young entrepreneur to determine his next steps. Would he use comparison-shopping techniques to determine the best buy? "Sure," he said, "but it depends on where my mom will take me to shop." I was pleased he knew what I meant and asked him how he knew about the concept. He said he'd learned it from his mom, that she clipped coupons, and allowed him to help make some of the shopping decisions. He said mom was great at stretching her dollars. In fact, he was rather proud of her. He also said he had to turn over to her a small portion of his earnings that will go into his savings account.

This story indicated to me the power of youth participation in making family money decisions and direct teaching of money management skills. This young man had a mother who was modeling good behavior as well as allowing her son to practice and participate in developing good money skills. She was providing him with the opportunities to make real money choices as well. We all know how we learn from our own experiences and the research says this learn-by-doing approach is relevant when teaching youth good fiscal skills.

Parents invariably ask me how to teach money concepts without disclosing information about their income or fiscal situation. Here are some concepts you can help youth learn and practice without giving away family secrets.

• Money limits and choice making. Young people need to learn to live within money limitations, to make adjustments when money becomes scarce, and to live with the consequences of decisions. Help youth think through the choices they make with the limited amount of money they have.
• Opportunity costs and setting priorities. Making choices is important because once money is spent for one thing, it cannot be spent for another attractive alternative; so there are lost opportunities. Money should be spent on the most important things first. Helping youth learn to prioritize wants, differentiate between what is important and what is not so important and recognizes that needs and wants are different are important concepts for successful financial management.
• You can share with your child how you make your choices based on the values and goals that underlie your decisions. It is important for a child to have opportunities to make choices with your guidance and support. Choices that work out well give you the chance to offer praise and share in your child's pleasure. Of course, some choices will not be wise. At these times, you can help assess what went wrong and provide encouragement for future decision-making.
• Conservation and dollar "stretching". A child can learn that limited amounts of money can satisfy more wants if he/she takes care of the things he/she already owns. You can help your child learn that appropriately substituting time and skills for spending "stretches" available money and that taking care of their things can prolong the time of use.
• Setting goals and making money plans. Youth this age are old enough for you to help them develop a money plan. The plan should be a simple one that they can understand and should support the goals on which you both agree. Help him to set up a system that will allow him to succeed in his goal. This may mean offering more "earning" opportunities or setting up a savings system.
• Saving and sharing. Youth can learn how to make plans for sharing and saving as well as for buying. Planning to save for holiday and birthday presents, to share with others less fortunate, and to save for items too expensive for one week's allowance helps a child develop important habits for the future. Help an older child implement longer-term savings plans by helping them open a savings account and make regular deposits in person or by mail.
• Consumer skills such as comparison-shopping, seeking good information, reading labels, knowing about product warranties, and handling returns of unsatisfactory products are all important skills that can be learned and practiced.

Research tells us that employment fosters an understanding of the relationship between money and time, skills and effort. Working and earning can help enhance the self-esteem of young people as they discover that they have abilities for which someone is willing to pay. Learning these skills takes time and practice on their part and yours. Guiding in decisions rather than making the decisions for them is the key to the next steps.

—Maria Pippidis
Originally published in “Newark Outlook,” The Newark Post

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