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| Parenting |
Making Allowances for Youth
Mary Lowengard
04/01/2004
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One family Eileen Gallo
counsels carved out a special time each month to sit down with their
children to go over receipts. They simply ask: “Are you happy with how you spent
your money? What would you do differently next month?”
Money for clothing is
typically added to the budget between the ages of 12 and 14—presuming parents
are confident that their teenager can handle the responsibility. Here,
Princeton, N.J., financial advisor Eleanor Szymanski of EKS Associates
recommends that parents do their homework—especially in totaling up how much
money was spent the previous year—in order to establish a baseline. “The best
way to teach children between the ages of 12 and 18 is to tell the child you’ve
budgeted this much for clothing on a monthly, quarterly or even annual basis.
Then let the child decide how to spend it and make his or her own mistakes.” The
toughest part, she concedes, is “not caving if they run out of money.” In the
end, the lessons learned about spending are well worth it. “The ultimate goal is
to make your child independent and self-reliant,” she says.
The savings
portion of the allowance can be dropped into an empty jar or deposited in an
interest-bearing savings account, which demonstrates in dollars and cents the
mechanics of how interest accrues. Alternatively, parents can offer to pay a
special “family rate” of interest, perhaps offering to match funds that are
saved over a period of time. In the later teenage years, parents may want to
redirect savings into investments by opening an account with the family
brokerage or with a separate broker.
Thomas Zanecchia, the president of
Denver-based Wealth Management Consultants, applies the tripartite model in his
own household with his two daughters (one in high school and one in her freshman
year at college). “When the girls were 5, we opened accounts at the Young
Americans Bank in Denver, where even the deposit slips are child friendly. I
explained to them how they were making money while they were sleeping.” He
advocates opening checking accounts for children as young as 11 or 12. At that
age, it is more likely that a parent will be with the child as the check is
written, so financial oversight can be given. Zanecchia introduced debit cards
around ages 14 and 15, when he taught his girls how to enter their transactions
into Quicken and began asking them to file monthly reports.
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