Family Meetings and Teaching Financial Literacy

When we gave our son his American Express PASS card, he immediately made a bid for more allowance. My reply: Let's sit down at a family meeting and we'll discuss it. In the meantime, I told him, he should think about what extra financial responsibilities he wants to take on with the additional allowance.

Family meetings are a great way to maintain an ongoing discussion within which you can both support and teach your teen about money. I highly recommend that you have a family meeting once a week (at least in the beginning) to check in and see how things are going; to determine whether your teen is feeling comfortable with her allowance; and to review what upcoming expenses she may need to be saving for as well as what she's currently spending her money on.

My husband and I found that family meetings were a great way to overcome our own initial discomfort around money.

Like most people, we weren't taught that much about money as children. It just wasn't talked about. Sure, we would hear, "We can't afford that," and "You'll have to pay for that yourself," as much as anyone, but in-depth discussions about money? Never! I guess we were supposed to "intuit" how to budget, spend and save. The lack of discussion around this topic created the sense that money was a "forbidden" topic. In fact, I remember how, when my step-father sat my sisters and me down to discuss his Last Will and Testament I was overwhelmed with embarrassment. I mean, he was bringing up two out of the three most difficult subjects to discuss (sex being the third) -- what was he thinking!? In retrospect, of course, I see the value in his courage to broach this topic early on. After his death, my sisters, mother and I were completely clear about his wishes and his finances. And, his ability to talk about money (albeit after we were all grown) opened my eyes to the need to have frequent conversations with our children about difficult topics.

By having "the money talk" in the formalized structure of a family meeting, some of the potential emotion is taken out of it. At your first family meeting, you will need to discuss the amount of allowance you're planning on giving to your child. Prior to that meeting, you should decide what, specifically, you would like your teen to be responsible for. A little planning also goes a long way in easing any discomfort that might occur.

At the meeting, explain the allowance and accompanying responsibilities thoroughly. It's likely your teen will either negotiate for more money or fewer responsibilities. This to be expected. Listen and remember that you do not have to make a firm decision at the first family meeting. In fact, it’s probably better that you don’t. Instead, promise to take what your teen wants into consideration and schedule another meeting to follow up.

Each subsequent meeting should begin with the question: "How's it going?" In addition, you should ask your teen if he needs help budgeting. Tell him that you want the process to be as comfortable as possible and that you're all in the learning process. Nothing is set in stone -- it's more like an on-going experiment. Ask what, if anything, he's finding difficult about the process so that you can instruct him on ways to make it easier. A lot of teens find that the most difficult part of being responsible for their own money is creating a balance between what they spend on short term items and what they need to save for items that aren't bought daily or weekly. Help your teen think in terms of saving a percentage of his allowance for items that are purchased less frequently.

Interestingly, since giving our son his PASS card, we've found that he's spending less, rather than more. I'm not sure if it's that we're on vacation and there are fewer opportunities to spend, or if it feels just a little more difficult to spend than money (which has a tendency to burn a hole in most teen's pockets.) In any case, we'll have to see what happens when school starts. Again, we're all learning here!

Now to answer a question that may have been on your mind since the beginning of these posts: "What about the "real world" issue that people, ultimately, do have to work to get money? How do we teach our teenagers that lesson if we're giving them an allowance and they don't have to do anything to 'earn' that allowance?"

I do think teens should have to earn money as well as receiving an allowance. Earned money can go into their
discretionary fund: to go out on a date, go to the movies, make iTunes purchases, or save for the future.

There are a number of ways your teen can earn money, even in a difficult economy. Some of the following are things you might choose to pay your teenager to do for you, some are opportunities he might have to seek out in the neighbhorhood:

Wash the car
Bathe the dog
Mow the lawn
Run errands for someone who’s homebound

And then there are the more "official" jobs: at fast-food restaurants, working in a movie theatre, retail stores, etc.

Join me next week for my fourth post on creating financially literate teens!

(Please note that in this post, as in all of my blogs, any opinions expressed are solely those of the author.)

Please note that Julie Ross is being compensated by American Express for these blog posts and the ideas expressed are entirely her own.