Lately, I have been asked to present several programs related to financial literacy - learning how to manage your money. It has been interesting because the most popular part of the program is the discussion related to each person's "spending personality." What is a "spending personality?" A spending personality helps answer the question - "Can you control your spending?" Wellllll, can you?
The discussion in the lesson I present has to do with recognizing "needs" and "wants". A need is something that is necessary in your life - food, shelter, clothing, electricity, etc. A want is something that would be nice to have - but not necessary! I want so many things! I need so many things! Your spending personality comes down to the question: "Do I NEED to buy this (item)?" "Is this item something that would be nice to have - but I don't really need it?"
It is hard enough for parents and adults, in general, to try to ask ourselves the question as we contemplate whether to spend our money or not; but talking to teens about needs and wants? Wow - talk to the hand! Let's discuss what is normal about adolescence.
It is normal for teens to have a need to belong. They, however, do not want to stand out - just want to fit in. That goes for clothing, shoes, knick-knacks and other things used as accessories for the body, as well as, the basics. The other complicating factor is immediate gratification. They find it difficult and do not want to "save" for whatever it is they want to purchase. They want it NOW--not tomorrow or next month or "we'll see." At this point communication begins to shut down between a parent and a teen and relationships are strained. You also get the rolling of the eyes, the sighs, and don't forget - the dirty looks!
How can you, as a parent, help a child learn the essential life skills related to money management?
One way is to share the reality of your family budget. Write down on paper (if you don not already have it) your income (take-home pay) and all of the expenses that are NEEDS in the lives of you and your family. Write down the other expenses - the loan payments, the credit card payments, and any other payments you may have. Write down the amount you are saving. Have them help you "pay the bills" next month by reading the expense and your write the check or pay on-line. Watching the money "GO" where it needs to go first can be a real learning experience!
Another way to help them understand the budgeting process is by using "money jars." These are canning jars, mayonnaise jars, whatever clear jars you have. Your child should label the jars - NEEDS, COLLEGE SAVINGS, SAVINGS FOR WANTS, and GIVING/DONATIONS. These are only four jars but you could have more. It is so simple but watching a money jar grow or get emptied is a hands-on, experiential tool to help children and teens develop a positive spending personality.
The ground rule is that the College Savings, and Savings for Wants Jars - keep growing. The College Savings jar never gets emptied until it's full and ready to be deposited in a savings account; and then it starts getting filled all over again! The Savings for Wants jar gets emptied as the money accumulates to buy the wants - a new video game, a new trinket, or some other not necessary for life item. The Needs jar also gets emptied as the opportunity arises to purchase whatever is needed. And then there's the Giving jar. It should grow, but it should also be emptied - perhaps 10% of the total at a time to help show children and teens that sharing what we have with others is a compassionate and important gesture.
The new money rules are:
Live off - 50% of your income
Save - 20%
Grow - 10%
Have Fun - 20%
When you think about it these rules allow YOU to control your spending, cut down on expenses, and move to being more financially secure; while still having some fun!
Teaching your children to manage money is a life skill which they will carry with them the rest of their lives. Start today and communicate your monthly budget process with your children. All of you will learn from the experience! Literacy for Life!
