Teens underestimate the true costs of items. I find that this money mistake is magnified when teens shop for a car purchase, so I will use it as an example. Say a teen has saved $4000 for a car, they think they are going to buy a car that is $4000. They neglect to think through the purchase and it’s added costs – like insurance, state registration and taxes.
Parents, being more aware of the real costs of cars and other shiny objects their teens want, will need to keep an ear open and listen for times when their teen talks about making a future purchase. At that time, talk to your teen about the purchase, help them research the costs and make a written plan. This will help your teen create a goal for the true value of the item they wish to purchase.
Teens don’t make a plan to save their money. Teens tend to spend what they have in their pocket thinking they will get more when they need more. And sometimes they even plan to spend what they will be getting at a later time. Parents can help their teen save money by setting expectations of how much money their teen will save using a written plan with money goals. Creating a savings plan helps your teen build a net-worth. While they may need their money for college or other things in their near future, it is good to show your teen what it is like to actually have a net worth, a worthy goal in life.
Teens carry too much cash. While some may argue that carrying a debit card is worse, I think teens are much better off with a debit card then $100 on their person. Cash gets spent, lost or stolen. Teens are much more inclined to spend the full one-hundred dollars they have in their pocket then to use a debit card until they have nothing left.
Parents can encourage their teens to carry their debit cards and deposit their full paychecks into their checking and savings accounts. Explain to your teen that lost debit cards can be replaced, not so with cash.
Teens give into impulse buying. Because teens 'go shopping' to hang out with friends, they tend to purchase things they don’t need and didn’t even want before they saw it. They have little impulse control to begin with, but the peer reinforcement on mall trips adds to the problem. Parents can help their teens learn impulse control by acknowledging the normal behavior of impulse buying, teaching their teen to set a goal and helping them create a good habit. Talk about impulse buying and share a humorous time you bought something you absolutely did not need. Remind your teen what they are saving their money for and role-play impulse buy situations, so your teen can figure out things to say to his friends about why he doesn’t want to purchase the impulse buy item. Or your teen can always tell themselves that they can purchase the item, but they have to wait until tomorrow to get it. Usually a teen gets over the impulse by the next day and the money is saved. When a teen uses these tactics instead of giving into impulse buys they establish a good money habit.
Teens will lend money to their peers. This is a sure fire way to lose a friendship or get into trouble dealing with peers who never intended on paying your teen back. Parents should explain to their teens the problems that can happen when you lend money to a friend, encourage their teens to not disclose how much money they have to peers and insist that your teen talk it over with you before they make a loan to a friend.
