Today I want to share with you a few excellent tips from a new book I just started reading. The book is called Smart Money, Smart Kids: Raising The Next Generation to Win with Money by Dave Ramsey and his daughter Rachel Cruze. Full disclaimer here, I am a huge Dave Ramsey fan. His fantastic book The Total Money Makeover literally changed my life and some really negative money habits I had developed, which in turn has affected my family is some wonderful ways.
I will be honest with you and say that this book definitely has some predictable stories and I found myself scanning through some of the pages. However, the age appropriate suggestions and action tips are really valuable.
Here are three takeaways that are worth considering for you and your teenager.
1. Commissions vs. Allowance
I talk to a lot of parents who struggle with getting their teens to do their chores. The teens always argue that they will be fine once they get a job because they will be getting paid to work. However, your teen needs to learn early on that money comes from work and this can start well before he gets a job. Just giving him a set allowance does not give him the opportunity to learn how money works.
So, basically commissions involves paying your teen to do his chores. Giving your teen the opportunity to be responsible and earn money is a win-win situation. You can set up the guidelines however you want, but it is important to say there are going to be certain things he is required to do just because he is contributing to the family.
Side note: we started doing commissions this week in my family and I have never seen my kids more motivated to clean their rooms and do the other chores on the list. I am pretty curious to see how long that lasts! Take a look at our simple chore chart (found this at Office Depot).
2. The envelope system
This tip is all about teaching your teenager how to manage his money. I have been sharing these concepts with my kids for awhile, but this week we will actually start using the envelope system. Dave Ramsey teaches that the three things you do with money are saving, spending and giving. A simple way for your teen to learn basic budgeting is to split the money he earns into these three categories and use envelopes to keep it organized.
Most teenagers that I know are excellent at spending their money, usually on video games and junk food. 🙂 However, the ideas of saving and giving are really important for him to learn as well. For most teenagers, the saving envelope will likely be designated for their first car or any other large purchase that they are motivated to save up for. I think it is a great idea to help your teen learn the value of giving, whether this is through a local church, non-profit or a favorite charity.
3. Starting a business
There is a great story in the book about how Dave Ramsey told his two daughters, 14 and 16 years old at the time, that he wanted them to start their own business. He wanted them to create a business plan, marketing strategies and even put together a profit and loss statement! They came up with and executed a great little business idea called Your Integrity Snacks.
I think this idea is amazing and requires teenagers to learn and apply real world skills. I can guarantee that I will be preparing my two girls for their teen years by encouraging them to create their own business.
You can check out the book Smart Money, Smart Kids on Amazon HERE.