The first step to teenage independence

Being a teenager isn’t easy ­– it’s when the real transition to adulthood begins. But along with all the physical and emotional changes comes the first real taste of freedom.

For many teenagers, it can be all too easy to live a life of leisure at the expense of mum and dad. But as their cost of living increases, there comes a point where the allowance you’re willing to give them probably won’t be enough to cover everything they want to buy. That’s when you should encourage them to find a part-time job.

More than just a way of working towards financial independence, a part-time job can give them valuable work experience. Even if it’s casual, or in a field totally unrelated to the career they one day hope to pursue, they’ll learn a lot about responsibility, build up self-confidence in their ability, working with people different to family or classmates and pick up new skills.

I asked a few friends of mine who have teenage kids how they handled the pocket money situation once their kids started a part-time job and whether it changed their approach to giving pocket money. Here’s some of the advice I was given, based on their experiences.

A new set of rules.

Once teenagers start earning their own money, make sure they have the right attitude about what to do with it. Where previously you were covering a lot of their expenses, like travel costs, and clothing, it may be time to ask them to contribute. If they want a branded item, instead of the basic version, ask them to pay the difference. It’s also worthwhile asking them to create their own perception of what something’s worth, rather than just following what friends think or paying over-inflated retail prices.

Spend time with your teenager to help them get to grips with budgeting. Create a spreadsheet that details all their income and expenses to help them understand cash-flow. One of my friends explained how they used to give their daughter a weekly allowance, but switched it to monthly once her first pay cheque came through, to help her learn to budget for a longer time-scale.

Saving is a good idea at any age, so encourage your teenager to put away a decent percentage of what they earn. One tip that I was told what worked best was depositing a regular amount into a savings account on payday as they didn’t miss money they never actually had.

Necessary evils.

As they approach adulthood, there are two more issues you’ll need to discuss with your teenager: tax and credit.

Tax is the scary one. You have to explain what it’s used for and how it’s important – even if at times it can seem unfair to be giving your hard earned money away for often invisible reward. Show how it’s broken out on their payslip and introduce them to the idea of annual tax returns.

Spending money they don’t have probably won’t be a temptation for most teenagers as they can’t apply for a credit card on their own until they’re 18. If you decide to co-sign an application on their behalf, be sure to keep the credit limit low. Some parents trust their teens with their own credit card details for convenience. (If you do, be sure to keep an eye on your online balance.)

Even if you don’t plan on giving your child access to credit, it’s important to explain how it works ­– and to demonstrate how quickly debts can build up if they only pay the minimum amount off each month.

Once your teenager can successfully manage their in-goings and out-goings, congratulations, they’re well on their way to financial independence.

Top tips

  • Find out what the minimum age of employment is in your State or Territory, and once they’re old enough, encourage your child to look for part-time work. It builds confidence and sets them on a path to independence.
  • Make sure they’re saving a percentage of their earnings.
  • Teach them to budget.
  • Talk to them about tax and paying with credit.
For related posts and downloadable activity sheets about financial literacy for kids, visit The Beanstalk.