At some point, the toddlers and teenagers who filled my house with noise became teenagers and teenagers. The toys they once longed for and constantly played with were slowly being packed away and given to charities, and their tastes have changed. They want devices now – cell phones, tablets, high-end PCs – and our oldest is longing for a car in the near future.
While a small weekly allowance used to be great for helping them buy the occasional toy they wanted, a few dollars a week doesn’t really get them to buy the things they want. Sarah and I don’t want to just give them a handful of money either. Should they get a job? What is the solution?
The cost of teenagers
The USDA reports that the cost of raising an average American child from birth to adulthood is $ 233,610. That’s an amazing number, but in our experience it holds true. Having a child means having a bigger house, having a bigger grocery bill, clothing and education expenses, buying gifts … that add up surprisingly quickly.
That really kicks in when they become teenagers. Spending increases as the child ages and averages $ 900 more per year for teens 15-17 years old. Why? Young people have higher food costs as well as transport costs.
This is in line with my family’s experience as our children move into this age group. Our teenagers eat a lot of of food, usually far more than Sarah or I at our family dining table. Our elder in particular is very interested in a car and regularly talks about plans that will result in him having one that he can drive.
Spending Habits of Teenagers
All of our children’s tastes have become more expensive. Every child has developed a hobby or two, which are also quite expensive. For example, my daughter is constantly drawing and seems to be consuming art supplies, and my oldest son is a competitive speed cuber who requires a seemingly endless series of combination puzzles of various shapes and sizes.
These aren’t just my own teenagers, either. As this Piper Sandler survey shows, the average American teen spends $ 2,150 a year out of pocket on groceries and consumer goods. The survey also finds that both teenage boys and girls spend a surprising amount on video games, especially microtransactions. Again, this is in line with my point of view, as some of my kids socialize by playing social games online with friends while talking to them and are willing to give their permission for better features and appearances in the game, usually with small one-off purchases.
Should Your Teen Get A Job?
For many, high school is their first opportunity to find work outside of the home and earn your own paycheck. This experience not only represents an exposure to the real world of job responsibility, but also represents a tremendous increase in income that poses new challenges to the budgeting skills previously learned from allowances.
Should a high school student even have a job? It’s a mixed bag. A 2011 study in developmental psychology shows that intense work experiences in high school later in life lead to poorer outcomes for educational attainment and substance abuse. A 2010 study published in the Journal of Educational Research found that part-time jobs had a small but statistically significant negative impact on grades and standardized test scores.
On the other hand, high schoolers who were paid for employment showed more freedom of choice and independence, as the sociologist Jaylen Mortimer describes in a 2010 study. While the temptation to make money and gain hands-on experience can be great for high school students, responsible parents should set some limits on employment, especially during the school year.
Another perk of a job is that it gives a high school an opportunity to get their first checking account and debit card. Although this step can be taken without a job, a regular job gives your child a chance to see the cash flow at work in their life as money comes from work and flows out in the form of bills and expenses.
So what’s the right call? A balanced approach is likely to be the right one, starting with thinking about your child’s focus. If your child is highly focused on academics and extracurricular activities, you shouldn’t be pushing a job beyond that. Consider continuing and increasing an allowance, and look for opportunities for larger paid home chores that go beyond the normal expected duties. On the flip side, if your child wants independence, a job can be a good move, but severely limit hours of work during the academic year.
For our oldest child, he has shown some interest in a summer job, but said he prioritizes grades and goes to good engineering school instead of spending money. We support this approach for him.
Teach your teen about credit and personal finance
As teens gain more control over their own expenses and finances and near college, the conditions for their first lessons in credit and personal finance will be created. Getting good credit early on will make it easier for them to take financial steps during and after college, and good financial habits will serve them for a lifetime.
With that comes a greater need for the basics of personal finance. Things like having a checking account, paying bills, and doing basic budgeting all become possible in the teenage years, and under your auspices they become a great personal finance learning environment. Let’s look at some options.
Add your teen to your credit card as an authorized user
A good approach is to simply add your teen to your card as an authorized user. This way they can build up credit in a very controlled way and easily review every purchase they make. This includes trust and clear boundaries on how to use it so you don’t face a lot of unwanted expense.
- Benefits: It’s simple, it gives you good control over the use of the card if you pay attention, and it can improve creditworthiness provided the card issuer reports credit history to the credit bureaus.
- Disadvantage: It carries a financial risk for you.
Give your teen their own credit card
If you are at least 18 years old you can get your own card. Your child is likely only entitled to a card with a relatively low credit limit. To ensure that it is building a good balance, it needs to maintain a low level of usage (only using a small portion of its available balance). It should be noted that under the age of 21, they must have their own source of income in order to receive their own credit card under the CARD Act 2009.
- Benefits: This allows your child to discover an additional level of independence. Used intelligently, it can help a lot with credit.
- Disadvantage: Your child can damage their credit due to excessive debt and late payments.
Register your teen for a checking account
A checking account is a good move if your teen has a steady income from a job or other source and has consistent bills to pay too. It’s also easy to sign up your child for an account through a local bank.
- Benefits: Knowing how to use a checking account is a good basic financial skill.
- Disadvantage: It’s not particularly useful if they don’t have consistent income and expenses, so this can only be useful for older teens. A checking account also does not help with building up a loan.
Make wise spending decisions
One final strategy that worked very well in our household was open discussions about spending. While it is useful to ask if it makes sense to buy in the heat of the moment, consider reviewing the spend later. For example, if your teen is excited about spending money on a certain purchase, let him do it, but mention that cost a month later and ask if he is still happy with it.
You can even make this systematic when using a debit card or credit card for their expenses. Sit down and go through each issue, considering which ones feel silly now and which are still a good idea. Then teach them how to put an idea for something they want on a “gift list” so that they feel like they are taking action on the fly without giving in and spending money on it.
- Benefits: Creates money conversations and teaches good strategies for making smart spending decisions.
- Disadvantage: Can cause pushback, works best with thoughtful reflective teens.
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