Parents Help Kids Achieve Financial Skills

Understanding Money Concept Changes as Teens Develop

Apr 28, 2009

Younger teens may lack the ability to appreciate the concepts of savings, but as children age parents can help them develop good financial skills.

Many parents begin giving allowances fairly early in their children's lives. However, kids need to reach 14 or 15 to begin to understand the concepts of saving for future purchases and appreciate parents contributions in adult terms.

The Concept of Money

Fairly early in developmental stages, children can begin to understand the concept of money and the trade of money for things. Parents usually begin by giving a small weekly amount and encourage kids to save for longterm needs as well as buying things they want during the week. This allowance is often tied to chores or household duties.

However, Nancy Defrates-Densch in Case Studies in Child and Adolescent Development for Teachers [Harvest, 2005] differentiates the ability of children to understand the concept of savings along developmental lines. Younger children, up to the age of 12 or 13, can understand money and its importance. However, they do not yet have the ability to appreciate the concepts of saving for future needs, especially for unforeseen needs.

Parents should keep the idea of developmental readiness in mind when implementing their allowance strategy. The essential goals that can be met early in the teen years include:

Savings Toward a Goal and the Unknown

As adolescents move along the developmental stages, they begin to be able to think about future actions and decisions rather than simply living in the moment. Defrates-Densch refers to a number of different theorists and proffers the age of 14 or 15 to be the marker where teens can understand two important goals.

First, the goal of understanding money for future purchases. An ideal example is the concept of saving for the first car purchase. Teens can begin to understand they may need to save part of their earnings or allowances for this upcoming purchase. Parents can help by guiding the teen to set a savings plan, with small goals along the way. Parents may want to encourage this through rewarding achievement of the goals with an extra bonus payment.

For example, Rick is a teenage boy saving for his first car. Right now, he is 15 and he wants to be able to purchase a vehicle when he is 17. Although it's two years away, Rick is capable of understanding he needs to save for this future purchase. Parents can help guide Rick by establishing a savings account for him. They can further reinforce the idea of savings being a positive value by either matching the funds Rick deposits toward his car or giving Rick a certain amount of money for every $50 or $100 he saves.

Also, teens begin to be able to understand the concept of saving for unknown events. Although parents do not want to establish fear or the over importance of money, they may wish to share with their teenager a time in their life when they had failed to save for a unknown event and the effects which resulted. Teens should be encouraged to keep a rainy day fund, especially growing up in the current economy.

There are a few actions parents will want to avoid while teaching their children financial responsibility. Parents should:

Teens who learn financial responsibility will be ahead of the peers as they start out into adulthood. While younger teens lack the ability to understand complicated financial goals, parents can help older teenagers to learn the essential skills of savings.

The copyright of the article Parents Help Kids Achieve Financial Skills in Parenting Teens is owned by Reece Manley. Permission to republish Parents Help Kids Achieve Financial Skills in print or online must be granted by the author in writing.