As younger generations become accustomed to complex yet ubiquitous technologies that enable an ease of spending — think TikTok shops, affiliate links embedded in social media posts and the rise of ephemeral micro trends — their relationship with money becomes more abstract. Ultimately, this makes it easier to spend unintentionally to keep apace with the zeitgeist.
Financial planner and author Shannon Lee Simmons has worked with teens for a number of years and seen these decisions play out poorly. To help the younger generation become more financially confident, she advocates for a more emotional connection with money, rather than giving into what she calls “unhappy spending."
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Simmons, speaking with CBC (1), recommends teens make mindful financial decisions to understand which purchases bring them the most joy or an “emotional return on investment.” This gives them permission to spend their hard-earned cash without resenting their savings either. It also gives them a reason to save guided by personal goals rather than external pressures based on abstract principles they may not necessarily connect with.
But for any good financial plan to work for a teen, parents need to help.
How parents can get involved
Simmons suggests that parents need to help their teens think through their decisions and emotionally understand them, but not critique their decisions harshly.
She is highly critical of the concenpt of "shameful spending," wherein a parent chastises a teen for their spending decisions or wasting money. Instead, parents can help their teens understand their reasons for spending that money unwisely, and help them self-probe their decision-making process to see if that purchase brought them joy or not. This can help them learn from their mistakes.
Simmons also suggests acknowledging their financial fears rather than avoiding them. Be upfront with their apprehensions about the current economic climate or the hard decision of taking out student loans, for example. But then use this emotional connection to instill proper financial habits in them like budgeting, saving and investing.
Read more: Are you drowning in debt? Here are 3 simple strategies to help crush your balance to $0 in no time
The importance of financial literacy
Starting money management practices with teens might feel a bit overkill to some parents, but survey results from Edward Jones (2) suggest that introducing financial literacy at a young age will pay off.
Eight-four percent of Canadians in the survey said that learning about finances in school would have helped them manage their finances with less stress.
In addition, 78% of respondents who did receive money management training in school rated their current financial abilities as “good” compared to 59% who did not receive any formal education.
Parents who start early with the teenagers — or even younger children — set them up for success in the long-run. But on top of helping their kids manage their emotional connection with money, how can parents work at improving financial literacy in their home?
Tips to set your teens up for financial success
Knowing where to start with your kids or teens can feel overwhelming. Here are some recommendations from Scotiabank (3) on how you can teach your child to become more financially prepared.
- Help them spot triggers. With advertisements around every corner, teens can feel like they’re missing out on opportunities by not spending. Teach them to evaluate their decisions based on the emotional and financial return they receive.
- Create a budget together. Use budgeting apps or even paper financial plans to help your teen understand where their money is coming from and where it’s going. Simple heuristics like the 50/30/20 rule can help give them a baseline to work from when it comes to spending, saving and investing.
- Discuss financial goals together. To make their saving habits stick, teens need to be motivated. Discuss their financial goals together (e.g. saving up for a car) so they have an internally-motivated reason to make prudent financial choices.
- Open a bank account together. Opening a bank account together gives your teen a feeling of independence and ownership over their funds so they are motivated to manage them better.
Regardless of how you introduce financial literacy to your children, remember that spending wisely is an emotional activity just as much as it is a reason-driven one. Helping your teens understand their emotions to make mindful spending decisions is just as important as creating a proper budget.
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Article sources
We rely only on vetted sources and credible third-party reporting. For details, see our editorial ethics and guidelines.
CBC: What is unhappy spending? How to teach teens to get smart about money (1): Edward Jones (2); Scotiabank: How to raise financially confident kids: practical lessons for every age (3)
This article originally appeared on Money.ca under the title: ‘Unhappy spending’ could cause young people to develop bad financial habits. Here’s how you can help
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