How Our Teen Daughter Learned to Manage Money

Money matters can get complicated. Buying what you need and want while living within your means. Purchasing the right amount of insurance. Investing wisely and saving for your child’s college education. Minimizing debt and maintaining a strong credit rating. Protecting yourself from scams. Today, many young adults leave home without knowing how to manage their money. This guest post comes from Meredith Bell, president of Performance Support Systems and my business partner for more than 25 years. I observed from a distance how she and her husband Lee raised a financially savvy daughter. This is her story.

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I’ll never forget the parent orientation at the University of Virginia as our daughter Alison began her freshman year. One of the professors told us that every fall first-year students are asked three questions:

Raise your hand if your parents have talked with you about SEX. Most hands go up.

Raise your hand if your parents have talked with you about DRINKING AND DRUGS. Again, most hands go up.

Raise your hand if your parents have talked with you about MONEY and MONEY MANAGEMENT. Very few hands go up.

Lee and I were surprised that we were in the minority. We’ve always felt that kids who are given whatever they ask for don’t learn to appreciate what it takes to work for something they want. They develop an “entitlement” mindset. It was our job to teach Alison about money.

When Alison was old enough to go to school, we gave her a small weekly allowance (not linked to her assigned family responsibilities). We increased the amount as she got older. However, when she turned 13, we decided to give her a clothing allowance. Each month she knew she would receive a set amount of money that she could spend on clothes. And by the way, it wasn’t a generous amount. She could spend it all on a single blouse or pair of shoes, or she could take advantage of sales, discount coupons and consignment shops to make her allowance go further. She understood that for a big-ticket item, she couldn’t come back to her dad and me to make up the difference. She would have to find a way to earn the money or save her monthly allowance. When she desperately wanted something she couldn’t afford, we told her to figure out how to buy it herself.

She earned extra money babysitting and doing special projects at home. When she was old enough for employment she worked in a women’s clothing store.

During her junior year in high school, her French teacher set up a student trip to France. Alison was beside herself with excitement about going. When she presented us with the total price for the trip, we agreed that she could go if she paid for half of the expenses. After an initial protest, she started figuring out ways to earn the money. And she did. I’m convinced she enjoyed the trip all the more because she invested her own money in the adventure.

After Alison started driving, she announced that she needed her own credit card. When asked why, she explained, “Because Ashley’s parents just got her one so she could fuel up her car and not worry about having to carry a lot of cash.”  

This explanation opened the door to more discussions about credit cards and financial responsibility. We knew that some of her friends’ parents gave their teenagers their own credit card and paid the balance at the end of the month. But we knew that this solution wouldn’t teach Alison the connection between incurring expenses and having to pay the bill. We wanted her to enter adulthood with one of life’s most important skills.

In the end, we decided to help her open her own personal checking account with a debit card. It was one of the best decisions we ever made as parents. The debit card prevented her from spending more money than she had in the account, though a couple of times she experienced the pain of overdraft fines. She quickly learned to monitor her balance. The card was the perfect introduction to money management. She learned she couldn’t buy something on impulse unless she was sure she had the money to pay for it.

When she left for college, Alison retained that account. She didn’t apply for her first credit card until her second year, when she had regular income from a part-time job. She faithfully paid off the balance each month to avoid paying interest. She chose to keep a $500 limit, even when the credit card company offered to let her increase it to $1,500. She didn’t want to be tempted to put charges on the card that she couldn’t pay on the due date.

And her thrifty habits have continued into her adult life. Whether shopping for clothing, home furnishings or food, she seeks out bargains. She’s taught her dad and me some great tips for shopping at consignment shops and thrift stores. She and her husband love to travel, and each trip is a personal challenge to combine economy with luxury. On a trip to New York City, they stayed at the Waldorf Astoria and enjoyed many fabulous meals because she uncovered terrific deals online.

Her personal money management skills influenced her career choice. She works in the financial investment industry, helping people make the most of their money as they plan for the future.

Two best-selling books about raising money-smart kids:

Make Your Kid A Money Genius (Even If You’re Not): A Parents’ Guide for Kids 3 to 23, by Beth Kobliner

The Opposite of Spoiled: Raising Kids Who Are Grounded, Generous, and Smart About Money, by Ron Lieber

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For a science-based explanation of ways to prepare a child for adulthood, get my new book: How Your Teen Can Grow a Smarter Brain.

Also, you can download 4 FREE guides, including  “The No. 1 Way to Nurture the Bond with Your Teen.”