THE AUDIO PODCAST IS AVAILABLE HERE: LISTEN
In this blog I’m going to cover issues relating to money with middle and high schoolers. I will go over how to give money and how much, when to give money, and how to set up responsible money habits including how to use an ATM card, checking account, credit cards.
Money is a huge challenge for us all and at this stage your high schooler or middle schooler is at a huge crossroads with learning life skills. Dealing with money is a much-neglected skill during these years yet they are the most crucial years to allow as many affordable mistakes as possible. This makes money a prime target for small mistakes now to avoid big mistakes later. If you know someone who can’t manage money as an adult, I’m going to guess their parents didn’t teach them much about it, might have given in to every whim just to keep them happy when they were young. Hey, that adult might even be you!
If you listened to my podcast about money for younger kids, you’ll have already heard how to start a small budget for vacations and special events that I call a trinket budget. We’re going to expand on that concept greatly by including more of the day-to-day expenses our kids encounter, not just vacations and special events.
With older kids I want to help you introduce money concepts so that by the time they graduate from high school they know about budgeting, credit cards and debt. I’m even going to show you a way to tie in getting chores done which is such a bonus. You want to launch a financially responsible child into the world so that you won’t be paying their bills for the rest of your life.
Let’s get started!
Middle School – start budgeting using what I call the
Setting Limits Method - During this phase you want your child to really understand that there are limits to what they can spend instead of just opening up your wallet and spending YOUR money.
Didn’t it get you in pre-COVID days when your kid said they wanted to go to a movie with friends and you had to fork over money on the spot not only for the movie but also for the popcorn and a drink? It was for their happiness, right? That parent guilt just gets to us when it’s done in the moment. All practical thought sometimes just goes poof, right out of our heads. Or, how about your kid going to Starbucks and getting a Frappuccino and a snack because they’re hungry. That can easily be a $15 transaction if you’re not careful. I had one friend whose child went to Starbucks every day without any care as to the family budget. Another friend was conned into buying extravagant birthday presents for their kids’ friends just because mom and dad hadn’t set a reasonable spending limit.
So, here’s what we’re going to do, you will set YOUR limit of what YOU will give them by category. You will also set a money allowance that’s in an unlimited category they can do what they want with. Have a family meeting or a private meeting with each kid if you have lots of different age kids. Just do this all up front with thought and planning, no puppy dog eyes as they’re leaving for some event. Feel free to have your kids help decide on what has limits and how much. The important thing here is that they start to learn that there are limits and it’s helpful to know what they are up front so no one is surprised.
Here are some ideas for some different types of things that you can talk about but keep in mind that some of these will only apply after we move out of this COVID time that we are now in.
birthday gifts for friends
Starbucks or other snacks
activity supplies for sports, music, etc.—like sports shoes or warmups or instruments and reeds or drumsticks and related equipment
activity fees (monthly, quarterly, by season, etc) if they are in sports, clubs or educational activities
school lunch money
You’re going to add up what you think is reasonable for you to pay for and give them that amount per month or when it’s appropriate. Some things you’ll still have to pay for that you can’t quite define like how many birthday presents are needed per month but you can establish a amount of what you will add to the birthday budget per birthday.
Here are more specific ideas of what a sample parent could allocate:
One Starbucks drink per week of not more than $5
School supplies of $50 per year
Lunch money for school lunch for 2 lunches per week
One movie ticket per month
Birthday gift budget of $25 per gift
Clothes budget $25 per month
Keep in mind this is for middle schoolers who don’t have a lot of freedom to roam. Put into this system whatever you can. Some parents will put in budgets for sports equipment like $75 for new basketball shoes and your kid can add their own money if they want to spend more on Air Jordans. Maybe they’ll be willing to get last year’s model instead of getting the $100 version? You won’t care, you’ll just be paying $75.
For me one of the first limits I set was for school supplies. For years prior we would head to Office Depot with the school shopping lists in hand. My boys would convince me that they needed new this and that. I was such a pushover. I caved just about every time.
Well, once I learned budgeting, I set a limit of $50 per kid, per year. I met with them and explained that they could use the money to purchase any supplies they needed but that was a yearly budget. They could choose to reuse what they already had or buy all new stuff – pencils, binders, paper, markers, erasers. I let them know it was all up to them. I loved them and was sure they’d learn to make good choices over time.
However, I also let them know, if they didn’t use all of the $50, they were welcome to use it for anything else. This incented them to be conservative and reuse much of what they chose not to in previous years. Yeah! I want to confess in previous years, I had been spending more than $75 on supplies. This was a total win for me and them.
I had friend who, after her two daughters constantly overran the data budget for their phone plans, switched them to pay-as-you-go plans and gave them a budget $15 per month. It was amusing for mom to watch how quickly her daughters used up those $15 and learned to look for Wi-Fi hot spots or wait until they got home to the house Wi-Fi instead of just constantly streaming data to their phones whenever they felt like it.
Now that we’ve talked about a simple budget I want to talk about an allowance. That’s the unrestricted money we give to our kids that they can spend on whatever they’d like. How much do you give and when is the question. As much as you think is appropriate and can afford, could be a dollar per week or $10 per month. It doesn't matter, but be consistent. I used monthly. The amounts can change as your kids get older; I usually gave them a “raise” on their birthdays.
My calculation was one dollar for each year they were old, per month. Yep… not much by some kids’ standards but that’s the point. You want kids to have to stretch and think about where to spend that precious money and how they can maybe save some on of their budget items that can move money into their unrestricted funds area. Like if they find an older pair of Air Jordans for $50 somewhere, they can pocket the extra $25 to use on something else, maybe snacks at Starbucks that you’re no longer funding?
You also want to encourage them work to earn extra money by doing extra jobs around the house or put out flyers or a post on NextDoor to offer to help their neighbors with things like dog walking, picking up mail, cleaning up dog poop or watering plants while neighbors are on vacation. A girlfriend’s son wanted a new, cool skateboard so he worked his buns off to earn the money for it. That mom also posted a list of what she’d pay for her kids to do her jobs if they wanted to earn money at their house.
All this was communicated in the open so no one was surprised by any of it. No whining and begging for “stuff”. Give them love and empathy if they don’t like it. “Oh, I know it’s hard to earn money. I’m so sorry. Let me know if you’d like some ideas. I sure love you.”
What about Giving?
When kids are young and we give them allowance and we ask them to allocate some to their “share” jar. We still want to encourage the “share” concept at this age and we can budget this item and put it in a “restricted” category that they aren’t allowed to move into their unrestricted “spend” area. They need to “share” it with a church or charity. No exceptions.
If they get birthday or holiday gifts, help them allocate some of that money into their “share” budget as well as to their savings account. Keep modeling for your kids your own giving and have discussions about how to help others with their share money.
One last thought before I head into the area of high school budgeting. There’s a super cool app that you can use for any age kid but it would be great to use for middle schoolers. It’s called GreenLight. It allows you to set up a debit card that’s controlled and monitored by you and used by your kids like a real debit card with restrictions on what stores and what amounts can be spent at certain places. It’s $4.95/month per family so it does cost a bit but it might be a good transition tool prior to high school.
Ages - High School
Speaking of high school… Every parent should jump at the chance to really step up budgeting with high schoolers. This is a crucial learning ground that will be backed up by affordable mistakes and really set up your kids for independence in college and beyond. Here are the basics:
Step 1 - Set up a checking account in their name with real checks and an ATM card that you can electronically transfer money to and from. It will probably be an account where one parent is a co-signer, that’s fine. You want your kid to swipe that ATM card to get used to our electronic payment-oriented society. If they run out of money the ATM card will stop them unlike a credit card. You can also set them up on Venmo, a popular payment app with students. Don’t be afraid to let them use it. Have them write checks occasionally too! Some kids really struggle to establish a decent signature especially since cursive is a dying art in schools these days.
Step 2 - Decide as many things as possible that your kid can pay for with YOUR money, yep, YOUR money like we did in the middle school exercise but WAY more detailed. Hey, you pay for all these things anyway so let's leverage that money to work for future independence! We’ll call this the INCOME side of the budget.
What kind of things could be added to the list:
- all the items listed in the previous age range
- private lesson fees – academic tutoring, sports, music, dance, whatever!
- sports fees - school sports, club teams, travel for sports, etc.
- lunches/meals - whether at school or outside
- college applications/testing fees
- prom tickets and expenses
- grooming – haircuts, nails, etc.
- student fees for things like yearbooks or school spirit gear
Here’s the kicker. I talked about incorporating chores into this budgeting process and here’s what you need to do. Post a price list in your kitchen of what you’re willing to charge for doing your kids chores for them. Then, if a chore isn’t done at the agreed upon time, no problem! You just happily do the chore for them and charge them for your services. I’d advise you to pick charges that really do make you happy, don’t skimp. Taking the trash bins to the street could incur a $10 charge. How about picking up that dog poop? $10? $20? Cleaning the dishes? Making their beds?
When you actually do a chore, I’d recommend posting a note or keeping a log somewhere that a snarky teen can’t rip it up if they’re mad. When it comes time to do the budget add the DEDUCTIONS for what I call “mommy chore” charges to the other monthly deductions. If they want earn as much income money as possible, they will learn quickly to keep their mommy chore charges to a minimum or do one of mommy’s chores to even out the deduction before the next pay period.
Cars for High Schoolers
Just a side note, no one should be buying their high school kids' cars, much less new cars. If they really need access to a car and you can afford to get one, find an older model car that’s not classy and buy it as a family car. We had grandpa’s old car for one boy and their aunt’s car for the other. A Toyota Corolla that’s 8 years old was not what my kids wanted to drive but both got them around until they could afford to buy their own cars.
Step 4 – Now, back to our budgeting. Step 4, calculate the money needed to cover the income and deductions in Step 2 & 3 and transfer that electronically to your child once a month. I would have my kids balance their checkbooks by hand before they got their next month's money just so that they could see the money come and go. They switched to online balance watching after a few years but their first years with an old-fashioned paper checkbook to balance was a good exercise. Sort of like we all learned long division but always use calculators now, right?
Step 5 - Sit back and watch them use their money. If they forget to pay their tutor or music teacher... GREAT! That teacher will help them learn to pay bills on time. If the instructor tries to get the money from you, I’d just redirect them to your kid and explain this is a learning process.
If they bounce a check... GREAT! Nothing like learning how much bouncing a check costs. Whatever you do, don’t get overdraft protection for their account. One dad did that and was only charging his son $25 instead of the bank’s $35 fee and his son didn’t blink an eye. We need to get our kids to blink and look the payment monster in the eye. This is real stuff so make it real. These are all affordable mistakes that you can give them love and empathy for when they happen.
Now, on the other hand, if they manage to save extra in areas of their budget that they decide they’d like to use the money elsewhere, great. Say you give them money for two lunches a week and they decide to make their lunch all days of the week. Let them pocket the extra to encourage their saving habits. Remember how in adult-life we have to save for a vacation or a new car? These balancing activities will help plant those saving seeds in their brains that they’ll use later on when purchases really need to be saved for over a long period of time.
Ok, you’re ready to launch! Those are the five steps. I do have a few more comments on money and teens.
Encourage Jobs to Earn and Learn!
One area I want to encourage is for all parents to allow and promote the idea that their kids should earn money by having a part-time job while in high school. I know. I know. There are lots of parents in Silicon Valley where I live who feel that doing homework and school is a job for their kids so they refuse to let their kids work outside the home. However, doing homework doesn’t prepare them for all aspects of the real work and I want you to help them get those extra skills.
Crummy, low-wage jobs are such an amazing place to learn all sorts of life-lessons that are never, ever taught in schools. Having to punch a timeclock on a schedule that your boss only tells you one week in advance and one that changes just about every week. Getting a real paycheck – do you auto-deposit or not. Dealing with taxes. Getting tipped or not tipped – they start learning how it feels to not get tipped even though they’ve been doing a great job. Dealing with co-workers that you didn’t choose – ones that gripe and don’t work hard are tough to work with.
My one son didn’t have much time between his academics and athletics but he managed to get a weekend only job at a local burger joint. It was a God-send if you ask me. He learned about all those things and more. Dealing with cleaning tables and taking customer orders. Priceless. Did you know that when we walk into a place like that, we often ask a 16-year-old what’s good on the menu? Haha! So funny! Kids that age are amazed that anyone would bother to think that they might know the answer. Precious lessons in building confidence and self-esteem. Please, please let your child work!
College Finance Ideas
Lastly, I just want to make a few comments to those of you who have college kids or will soon. You need to practice these budgeting things but scale it up even further. Have your kids pay all their own bills, yep, even tuition and room and board if they are going away. Agree ahead of time what you are willing to pay for and when you will be transferring money to them.
In my practice, I see too many parents just opening up their wallets whenever their kids call to say they’re out of money. I want to encourage you to set the limits up front and use empathy when they run out of money. If you’ve set up their high school budgeting experience appropriately this will not be hard or a surprise.
My boys knew in advance that they paid for all their own entertainment and eating out with money they earned from their summer jobs or jobs they got during the school year.
I think having a limit for food spending is really wise as well. Freshmen in dorms are usually required to buy a food plan. If they have a food plan, in my opinion, that means they have food even if it’s not the best. If they’d like to eat out, fine, it’s on their dime.
A friend could see her son’s bank account draining down and he only had $5 left in it at one point. What a bummer! He wound up getting an on-campus job to help even things out. Another friend just wound up paying for the dorm food that her child wasn’t eating in addition to all the food her child at out. Crazy, isn’t that? Picky eaters can have a tough time in college but at that stage it’s their problem that they need to navigate, not mom and dad’s.
Last topic, credit cards. It is important for our kids at some point to start building up credit for future purchasing power. I’d say as they go off to college is the time to research a good card for them and encourage them to start by choosing one type of purchase that they always pay for on their card and then pay off every month. There are lots of companies who will offer students cards that have really high interest rates that can get kids into trouble. Avoid those. Shop around!
Learning to deal with money can be an amazing journey and allow our kids to have choices when they manage money well. You being in their lives communicating and allowing for mistakes in loving ways is what’s going to get your kid into the right place. They will blow it occasionally, embrace those times with a growth mindset and love them though the process.
Whatever your child's age, please take the time to work with money.
If you found this information useful, please forward the link on to your friends and family.
Here are a few of my favorite books about kids and money.
Millionaire Babies or Bankrupt Brats
Parents are Not ATMs