Dear Dr. Karyn,
I feel like a bank on the weekends. All my teen ever asks me for is money and I'm tired of it. What can I do to teach my teens the value of money and money management?

Answer:
I'm sure many parents reading your question can identify with what you are experiencing. Money management is an important life skill and one that teens need to learn. Research tells us teens have never been so wealthy. Teens spend an estimated $175 billion dollars a year and yet this wealthy generation lacks money management skills. Youth under 25 are the leading group filing for bankruptcy. So your frustration is completely valid. Here are some key points. First, be clear about what you will and won't pay for. Set up a ‘parent teen contract’. I recommend, if possible, parents pay for the needs (i.e. clothing, school supplies) and teens pay for their wants (i.e. video games, entertainment, magazines). Second, be clear about how much you will give. If you are comfortable to pay for clothing, give a finite amount (i.e. $300/year or season depending on your finances and comfort level). It's important to understand that teens only learn the value of money when there are limits. If there is an endless supply, they are not forced to make decisions. Third, stick to your plan. If you've agreed you will only give ‘x’ amount for clothes per year, stick to it. If you start changing your mind throughout the year, your teen will learn that your word is not worth much. Fourth, go with them to open up a bank account. Show them how to make deposits, balance a cheque book and some of the neat savings programs that banks now offer. But do not do this for them. You want to teach them how to do it without holding the responsibility yourself. I recommend you start teaching these valuable lessons with your pre-teens or children as early as grade 5 or 6. Finally, model healthy and wise money management yourself. If your teen sees you spend more than you earn, make impulsive buying choices and are careless about where your money goes, they will learn these habits from you. Model for your teen what you want your teen to learn.

How Can I Teach My Children the Principles of Money Management?

Dear Dr. Karyn,
I want my children to learn the important life lesson of money management. How do I help them learn this?

Answer:
I want you to think for a moment…what are the financial principles you are teaching your children? Do they think you are tapped into an endless supply of money? That people should play first and work second? What about their own habits with money? Do your children earn their own money? Do they know how to balance a cheque book? Save? Shop for good deals? We are currently living in a culture that tells us to “buy now, pay later” and it’s scary to think that youth under 25 years of age is the fastest growing group for declaring bankruptcy in North America. I’m convinced it’s because many of us don’t understand and have never been taught principles of money management. If we’ve never learned, it starts catching up to us. As parents, I strongly encourage you to decide what money principles you want to teach your children. One step is to decide what you will pay for as parents and what they will be responsible to pay for? Set a reasonable limit. Discuss and negotiate this limit with them. And most importantly, stick to it. Building responsibility, whether it’s about money, school, or exercise, has one common denominator: it’s learning the power of the word ‘no’.  When we say ‘no’, for example, we choose not to buy something we really like because we want to save money, we’re really saying ‘yes’ to a bigger reward. This is what we call self-discipline.