By Kimberly Palmer | NerdWallet
The investing information provided on this page is for educational purposes only. NerdWallet, Inc. does not offer advisory or brokerage services, nor does it recommend or advise investors to buy or sell particular stocks, securities or other investments.
Giving money to teenage children might sound simple, but it can quickly become complicated. Parents often want to set limits on how much their teens can spend, teach them about money management and protect them from fraud, all at the same time.
“It’s about knowing your kids and tailoring the approach a little bit to the child,” says Amy Spalding, a certified financial planner at District Capital Management, a Washington, D.C.-based firm. Some kids need more active help to stay organized and learn how to stay within a budget, while others need to be encouraged to practice spending in the real world.
Here are some strategies to consider when providing money to your teenager:
Start with cash
When children are using money on their own for the first time, sticking with cash can be the easiest way for them to learn how to manage it, says Dan Tobias, a CFP and founder of Passport Wealth Management in Cornelius, North Carolina. “First, get them to understand and appreciate money with paper. Then, when you need to, you can switch to electronic methods,” he says.
That’s the approach he uses for his own three children. He gives them a cash allowance and lets them decide how to spend it, which includes letting them make mistakes.
“Don’t be afraid to let them fail,” Tobias says. Kids might lose a $20 bill, splurge on something that breaks the next day or, in his case, buy a fish and a tank that they soon don’t want anymore. Those mistakes are critical teaching moments, he says, so it’s important parents don’t micromanage their kids’ spending.
Leverage familiar apps
Once children start earning and spending their own money without you nearby, digital payments become more appealing. You can use methods you and your kids may already know, like Apple Wallet, Venmo or other apps already connected to your phone. They are often connected to a parent’s credit card or checking account, unless a child already has their own.
Sarah Behr, a financial planner and owner of Simplify Financial in San Francisco, says apps can be helpful because a parent can closely monitor a child’s spending and “keep the guardrails up” while still giving them the freedom to make their own spending decisions.
If a teen overspends without permission, that can lead to a helpful conversation about budgeting. At the same time, parents can find ways to make sure their own accounts are protected, by using the apps to set spending limits or creating separate accounts with low balances and low credit limits.
Spalding turned to digital payment apps when her teenagers started spending money on their own. She set up a separate bank account with a low balance to limit the potential damage if the account was compromised or …read more
Source:: The Mercury News – Entertainment
