Teen Budgeting Shapes Lives

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Byline: Gabriella Boston, THE WASHINGTON TIMES

Teenagers who work part time can feel entitled to spend their money any way they choose, but a little guidance from their parents can go a long way, says Neale S. Godfrey, author of several books about children and financial literacy.

"Don't let them learn by trial and error because they're just going to end up spending it all," says Ms. Godfrey, whose most recent book is "Money Still Doesn't Grow on Trees: A Parent's Guide to Raising Financially Responsible Teenagers and Younger Adults."

Ms. Godfrey recommends that parents sit down with their teens and work out a basic budget that includes goals for earning, spending, saving and giving.

She says 90 percent of the earned money should fall in the spending and saving categories and 10 percent should fall in the giving category.

"It should be a mandate to give to charity," Ms. Godfrey says. "You have to teach them how to be a good citizen and get out of the 'me, me, me' mode."

Of the 90 percent left over, a third should go toward spending on items that provide instant gratification (movies or food), a third on savings with medium-term goals (clothing or electronics), and the last third toward savings with long-term goals (car or college), she says.

"They are learning about earning, spending, saving and giving. These are skills they will need in the real world throughout their lives," Ms. Godfrey says.

Of course, telling teens how to spend their money can be tricky, she says.

"You have to be firm," Ms. Godfrey says: " 'This is my house. These are my rules.' "

When teens want to buy something and they need their parents' financial help to buy it, that's the most effective time for parents to talk to teens about money management, says Lewis Mandell, a professor of finance at the University at Buffalo's School of Management in Buffalo, N.Y.

"If you can dangle something over their head, they're more likely to listen," says Mr. Mandell, who has a doctorate in economics. "For example, if they want to buy a car and you say you'll pay for the insurance."

If the teens still aren't listening, it's time to shave off privileges, such as watching television or using the Internet, Ms. …