March 2002

Encouraging Money Skills

Learning to manage resources is a fundamental task of life. From an early age, children begin to learn about the financial world from parents, peers and sales marketers. As youth enter adolescence, they are able to earn money through employment, allowances and other sources. Because they now have income, teens are already making financial choices and developing habits that may stay with them into adulthood.

Especially during early adolescence, decisions related to purchases are often influenced by peers and advertising. Manufacturers will spend a great deal of money to advertise brand-name products to kids in the adolescent age group. When a group of youth has a certain brand-name item, others want the same. For youth in their early teens, it is often the fear of being different that drives youth to place importance on wearing or having the "best" items.

As youth progress through adolescence, they think more about future employment and saving for college. Their future goals will influence decisions about saving or spending. The amount of money that is "discretionary"–meaning they can spend it as they choose –also affects spending patterns.

Some teens become accustomed to spending their earned money on luxury items or wants. Problems then may arise in early adulthood, when they cannot afford to continue this level of living. It may be tough for teens who are used to having brand-name clothing or the best electronics to manage necessary expenses on a starting salary–unless they are willing to adjust their standards by purchasing generic clothing, for example.

While societal influences are strong, research shows that the family is the primary environment for learning about money. Children learn both the facts and the emotional side of finances from their families. Through their own habits, parents model financial behavior to their children. Parents also convey their attitudes and beliefs about money through discussion or lack of discussion about finances.

Helping Teens Manage Regular Income

• Help teens set up a simple plan for managing their money (a budget). This should include how much to spend, how much to save and how much to share (contribute to charity). Encourage them to think about their long-term goals and values as they plan.

• Teens who have a regular income can learn about credit by taking out a short-term loan under close adult guidance. First, discuss how the money will be used, the length of the debt, the amount of interest and the consequences of not making payments on time.

Developing Healthy Attitudes about Money

How can adults help teens develop healthy attitudes and skills in using money?

• First, consider your own attitudes about money. What feelings have you carried into adulthood, based on your family's approach? Think about what practices you want your children to follow. Your own actions will help to reinforce what you are teaching.

• Involve your children in discussions and decisions about money. This will help them learn about real-life expenses. Let teens see how money is saved, contributed to charities and used in purchases.

• As teens mature, they can take on some of the responsibility for making household purchases, such as buying groceries. This provides an opportunity for youth to practice comparison shopping and to see how much it costs to buy food, clothing or other items they may have taken for granted.

• Make a habit of talking about TV commercials and printed ads with your child. Ask your child to point out the ways advertisers are trying to draw attention to a product to make it seem appealing. With practice, youth will be able to pick out what is misleading about a claim or sales pitch. This awareness helps kids avoid being overly swayed by ads.

• Teach skills such as how to write a check, keep financial records and fill out a deposit slip.

• Make teens accountable for their behaviors. If they overspend, allow them to experience the consequences, such as not being able to go to the big game or concert if they have spent all their money and can't afford the ticket.

For More Information:

For the inside scoop on marketing to youth, read Kids as Customers: A Handbook of Marketing to Children, by James U. McNeal (1992; Lexington Books).

Sources:

Caissy (1994). Early adolescence: Under-standing to the 10 to 15 year old. Reading: Perseus.

Danes (1994). Financial Counseling and Planning, 5: 127-146.

O'Neill (1992). Journal of Home Economics, 84(3): 12-16.

Prochaska-Cue (1993). About Money and Children NebGuide, G-93-1164. Lincoln, NE: University of Nebraska Cooperative Extension Division.

Meyer & Anderson (2000). Journal of Social Behavior and Responsibility, 15(2), 243-257.

This issue of Ups & Downs was contributed by Ann Dobesh, Extension Educator, Butler County, University of Nebraska Cooperative Extension.

Ups & Downs is edited by Rosalie Bakken, Ph.D., Adolescent Development Specialist, University of Nebraska.