As parents, we want to protect our kids from making mistakes. But mistakes are an effective way to learn life’s most important lessons and financial mistakes are no different.
How do you let your teenager make manageable mistakes? Well, it means letting them decide how to spend their money, even if you don’t agree with their choices.
Of course, the degree of mistakes we let our kids make has to be age-appropriate. Little kids can make little mistakes and big kids can make big mistakes. We can guide our kids through the ages and stages of making mistakes, increasing the stakes slowly so that by the time they are teenagers, they will have had lots of practice and be better at making good decisions.
Your child’s relationship with money starts at a young age. When they are little and they get money for their birthday, you have control over it. You can take some of it and tuck it away in savings and tell them how much they have to spend.
At age six this is appropriate: give them $5 to S20 to spend on whatever they want. You might not like their choice and you might foresee the tears of regret that are to come, but you need to let it happen.
You can increase the amount of whatever-you-want money as they get older. It might go up to $30 and then $40. The more money they spend on something they regret, the greater the buyer’s remorse and the more impactful the lesson. As the parent, it will also get harder to keep your opinions to yourself so you’ll need some fortitude.
When your kids get to be teenagers, this approach doesn’t work any more – nor should it. They are gaining independence and don’t want to be micromanaged. When a 14-year-old gets money as a gift or earns money, they won’t be okay with you taking it.
And once your kids start earning money by working, it won’t even make it to within arm’s reach of your control. This is when you’ll start to see the effectiveness of the lessons they’ve learned.
But just how big of a mistake should we let our 16-year-old make? A $100 one? A $200 one? It’s true that the stakes are higher, but they are still not devastating. And, yes, we should let it happen.
A common teenage mistake – one that I’ve witnessed first hand – is buying a gift for a boyfriend or girlfriend only to break up shortly after the gift is given. Ouch. But the next time your teenager is thinking of buying an expensive gift, they’re more likely to stop and consider whether to spend all that money.
Older teens who are working and are supposed to be saving for college or university are even more independent. They probably have a lot of money in their bank account.
At this stage, your ability to control how they save and spend is pretty much zero. But if you’ve allowed them to manage their own spending from a young age, you should have nothing to worry about.
They will have learned the hard lessons of buyer’s remorse, and have the ability to see the benefits of delayed gratification as they save for the school year ahead.
No matter how old they are, offering some support and advice is always appropriate. When your child buys something they later regret, they will be feeling the emotional pain that comes with it.
Once the initial pain has passed and they are in a better place to talk about it, you can delicately step in and reinforce the lesson. Let them know that everyone has experienced buyer’s remorse at one time or another and that even though they made the wrong choice, they can learn from it, let it go, and start rebuilding their savings.
It’s a money lesson they won’t forget.
Anita Bruinsma is a Toronto-based financial coach and a parent of two teenage boys. You can find her at Clarity Personal Finance.
