Teaching teens how to budget and spend wisely can be difficult, but it's a vital skill. In adulthood, your teen will benefit greatly from a good financial education. GoHenry's CBI analysis reveals that 40% of adults who didn't receive financial education said they have no savings, showing just how important it is to start learning from a young age.
If your child is looking for ways to make money as a teen, it's important to make sure they know about spending their money smartly. If you're unsure how to teach your teen, our in-app Money Missions are an ideal resource to help them learn on their own, but there are also lessons you can help them learn.
Let's look at some of the subjects to help teach your teen about spending money wisely.
Spend, spend, spend
It's hard to avoid the marketing and advertising that is all around us. Online, on billboards and in shops, your teen is encouraged to spend money. There are more subtle ways that your teen is targeted with marketing as well - for example, a lot of products have logos, from clothes to food packaging, all designed to make sure that a certain brand is in the forefront of your mind. For teens, this is particularly noticeable on gadgets such as phones, and on clothing. On top of this, a lot of companies pay social media influencers to wear branded clothes or show off branded items, all to boost sales.
When a certain brand is seen a lot, it becomes more desirable, but it isn't always a good item to spend money on. Firstly, just because an item is popular, it doesn't mean it is of good quality or that it will bring value to someone's life. Also, a lot of consumer goods and services can have misleading or deceptive descriptions. It's important to make sure an item is what it claims to be before buying it. You can check if an item matches up to what the company claims by checking reviews. There are usually lots of reviews for items, especially expensive items like mobile phones. Showing your child how to find reviews from reliable sources can help them.
What do you value?
A lot of people's purchases are guided by their values. Some people prefer to buy cheaper items or second-hand items, some prefer to buy brand-name items. There are also a lot of ethical or moral considerations. You might want to encourage your child to buy locally-made items, fair trade goods or environmentally friendly items. It can be good to explain the basics of manufacturing to your teen - this can be vital to help them decide what is important and what kind of items they want to buy.
There's no wrong way to approach spending as long as it works for what your teen cares about. It's worth telling your teen how people with identical incomes can have entirely different spending habits as this can help show multiple different ways to spend or save money.
It's beneficial to help your teen work out what they value, and help them shop accordingly. For example, if they want to help boost your local economy, they might want to purchase more local goods. This gives money to local people, who will, in turn, use it on goods and services in their area, which pays the wages of local people - this is the circular flow of the economy. Other teens may want to save more money for their future, and might buy cheaper items - you can also tell them how the larger economy works, and that their money might then go to other areas.
Resisting the temptation to spend
This can be hard due to all the marketing that encourages people to buy items - items they might not even need or want. Shops push items with a lot of advertising and make items seem very appealing, but it's important to teach your teen that adverts can exaggerate how good an item is.
Having a weekly or monthly budget can help teens weigh up options and choose which items they want to buy. It's important to teach your teen how to budget, letting them see how much money they can spend.
There are other ways to resist temptation. For example, you could encourage your teen to wait before making a purchase. Waiting can remove the urge to buy an item, and it can give more time to check reviews. Plus, shops often place a discount on older items when new stock comes in. You can also encourage your teen to compare other similar items or compare different shops to find a cheaper item.
Being a critical consumer
Being a critical consumer means researching products before you buy them and looking carefully at what the marketing claims. There are lots of ways that companies carefully tailor their advertising to make their products more appealing. This means that consumers can be misled about the price, quality, value, and specific features of an item.
It's important to teach teens how to avoid being misled. This means researching the product and looking at reviews, as well as carefully reading all the information available about a product - the small print, return policies, warranties, and more. It can be a great learning exercise to sit down and read this kind of information with your teen and explain what certain bits mean. Then see if they can pick out any misleading information by themselves.
Foreign currency exchange
Most teens use the internet nowadays, so even if they aren't travelling, they'll likely come across shops with prices in a foreign currency. It can be important for a teen to know which countries use which currencies - especially for common currencies like US dollars and euros.
As well as understanding that currencies have different values, your teen should know how all currencies fluctuate, meaning that their own currency might be worth more or less over time, as well as explain what the exchange rate is and how this varies. You can also explain how currencies have different buying power in other countries, as this can help them make wise buying decisions - such as choosing to import an item from a country where it is cheaper - but be sure to explain about import fees and shipping times.
Learning about the exchange rate also means knowing how to research the current currency values, as well as knowing how to pay for items abroad, and knowing how to change money into a foreign currency. Your teen should also know that there may be fees for currency exchanges.
GoHenry's in-app Money Missions
If you want more help teaching your teen about spending wisely, our in-app Money Missions can help. Our Money Missions are fun videos and quizzes, plus brand-new stories and bite-sized lessons for every age - with more advanced topics for teens. Your kid can use the Money Missions in their GoHenry app to learn about spending wisely, as well as budgets & plans, money safety, and saving habits - everything they need to help them spend and use their money smartly.
Learn more about the GoHenry teen debit card today!