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Teen with piggy bank. (Photo: Getty Images)
Start working on a plan now and become less financially dependent on your parents.
Temptations abound when you’re a teenager: CDs, airtime, magazines, movies, clothes, the latest computer games. So much to buy, so little cash. But the way you run your finances now will lay the foundation for a healthy bank balance later in life.
TIPS FOR TEENS
- Start with a budget. Keep a diary of all your expenses during the course of one month, including small things such as cooldrinks. Compare these expenses with your income, including pocket money and cash you got for your birthday. Do you blow it all? Or do you put some aside for long-term aims such as saving for a holiday after your matric exams or an MP3 player? This is a practice you won’t regret acquiring now if you want to make a success of your life. Work out an expenses plan detailing how much you can spend monthly on things such as entertainment and snacks, and how much you want to save.
- ‘‘Compound interest’’ is a term you should learn about now. The sooner you begin saving the faster your money grows because the interest is calculated on an ongoing basis on the interest you’ve already earned. For instance, if you save R1 000 a year for 10 years from the age of 15 to 25 and then stop it will be worth nearly R170 000 (at an interest rate of seven per cent) when you turn 60. But if you start saving only when you turn 25 and save R1 000 a year for 35 years it will be worth less than R148 000 when you turn 60.
- Find a weekend or vac job. This won’t only make you less dependent on your parents but you may also meet all kinds of interesting people and gain experience that may help you further your career later on.
- Don’t become a label slave. The hundreds of rand you pay for a trendy brand doesn’t necessarily mean better quality. Don’t follow the crowd; rather be an individual – also when it comes to buying clothes.
ADVICE FOR PARENTS
Help your kids to be savvy when it comes to money:
- Start talking to them about money from an early age. It’s important they realise no one can (or should) get everything their heart desires, Cape Town social worker and parenting expert Joan Eastwood says. This doesn’t mean parents should automatically say no to everything their kids want – that’s destructive and will only lead to animosity, she says. But if you’ve thought about it and said no, stick to your decision.
- Chat to other parents who have kids the same age as yours to find out what’s a reasonable amount for pocket money. It works best if kids are paid pocket money weekly and pay only for snacks, movies and gifts, Eastwood says. A clothing allowance rarely works. It’s often too little which means parents still have to pay for shoes, jackets and eveningwear, causing resentment on both sides. If you give a clothing allowance your teen must understand exactly what it’s for.
- Don’t make too many rules about money and expect too much from your kids, Eastwood says. Give them the relative freedom of using their pocket money and any cash they get for their birthdays to buy snacks, things for themselves and gifts. This will encourage them to be generous and learn the joy of giving. Older teens should however be encouraged to save and invest their savings, especially if they’re earning money doing a vac or weekend job.
- Don’t give your teens money in exchange for doing household chores or to reward them for an achievement, Eastwood says. The satisfaction they get from a job well done or achieving something should be enough reward. It creates an unhealthy pattern if your teen always expects money as a reward.
- Help your kids to open a bank account and help them save by exploring investment options such as savings accounts, shares and unit trusts.
- Lending your children money? Keep it formal. Let them sign an IOU saying when and how the money will be repaid.
