“Money grows on trees.”
“You get money in the banks for free.”
“Use your card at the ATM to get cash.”
“Swipe your credit card to buy that thing you want.”
Is that how your teenager thinks about money? If he does, it is not surprising at all.
Most teenagers have an inadequate understanding of money and finance. At the National Financial Literacy Test, 15-18-year olds score 60% on average. In comparison, the score of working age people (between 25-50 years) climbs to 73%.
Teenagers in America lag in financial skills as compared to their peers in other countries. A study was done by the Organisation of Economic Cooperation and Development to test the financial knowledge and skills needed to make the jump from high school to college and on into the workforce. This study found that one out of five American teenagers did not have the necessary skills expected of them at their age. In comparison, in Russia and China, the teenagers not having the required skills was only one out of ten – half that of America.
This was the case with American teenagers in general. Now let us throw ADHD into this pot.
For ADHDers money is at best an abstract concept rather than a reality. They can be careless about it and spend it with ease. They develop a quick liking for objects which then they must buy. Without really evaluating the need, they go right ahead and buy impulsively.
There are reasons why money management is hard for ADHDers. Financial planning makes use of a lot of executive functioning skills. It requires organizing, time management, planning, prioritizing – all of which are more challenging for an ADHD mind.
FINANCIAL LITERACY SKILLS NEEDED BY A TEENAGER
With some patience and organization, you can help them learn the skills they need.
- EARNING MONEY – it is all about sweat and tears
- BUDGETING, THEN SPENDING – knowing where the money goes
- SAVING – pay yourself first
- BANKING – get her an account, pronto
- Understanding Credit – it can swallow you.
Skill#1: EARNING MONEY – money is earned, not received free
Teenage is the right age for your kid to learn that money does not grow on trees. It is sweat and tears. Let him go get his first job.
Earning money helps develop a respect for it. He starts to prioritize how he spends money.
Let him go out, get a part-time job or a summer job. Let him babysit or walk the dogs.
As a parent, you need to make sure that your child is doing an age-appropriate job. The Department of Labor has set forth some guidelines about this. Talk to your child about the kind of jobs that he can consider doing. Talk about the number of hours that will not interfere with school and other activities.
You may consider involving him in household chores. Set up a system in which he gets paid either an hourly rate or per chore rate. It is unwise to just hand over a monthly allowance to your child. Let him earn it. He is contributing to the household too.
The payment should be with the active involvement of your teenager. If he has a bank account, write out a check to him. Let him go bank it. Take it a step further. Let him record and track the amount of work he has done. Then let them invoice it – weekly or fortnightly. Participation in the actual payment process equips them for the future.
Your ADHD teen
All the principles mentioned above apply just as much to your ADHD teen. As parents, you need to ensure that the job he is taking is something that interests him. Intrinsic motivation will help him to focus.
Ensure that his job along with school and daily routine does not overwhelm him. If it does, he is likely to give up very soon.
Skill#2: SPENDING MONEY – have a plan
The principle to follow is that your teenager is responsible for some of her expenses – be it the purchase of a phone or its monthly cost or for his clothes. Decide upfront what she pays for. Teenagers are routines responsible for categories like
- Personal – toiletries, haircuts, cosmetics
- Clothes – including shoes, sports uniforms
- Entertainment – movies, music, concerts, eating out
- Mobile phone
- Transport – including fuel, insurance & maintenance for his own vehicle.
As a student, your teenager will be able to put in more hours of work during some months and less during others (when exams are approaching). Her earnings fluctuate accordingly.
Let your teenager understand which expenses are needs and which are wants. If your child is responsible for her clothes, then games uniforms are necessary. Remind her that money is finite, which requires trade-offs and making choices.
In other months, they can have some more to spend on movies or buy that nice pair of shoes.
Do not take the easy route and give them an advance.
Your ADHD Teen
Your ADHD teen may require a little extra guidance and some tools. Guide her through this – step-by-step. Help her understand what amount she can spend in a month. Walk her through the budgeting process. Help her to prioritize. Do not make these choices for her. Instead show her how it is done. Let the decisions be hers and hers alone.
Let him use a planner (preferably analog) to log her expenses and to budget. Writing down things has many advantages. It helps better remember, increases accountability, serves as a visual reminder and will help her to review how she did.
Skill#3: SAVING MONEY – pay yourself first
This is one of the most important skills that your teenager needs to learn.
Have a rule that they need to put away 10% of every paycheck, every allowance and each birthday or Christmas check from grandparents.
Savings must only be used for emergencies or for pre-agreed goals, like for a phone. Keep this money aside. If he already uses a bank account regularly, then open a separate account for this.
This would be a good time to show him the power of compounding. Use an online calculator to show how compounding works.
Your ADHD Teen
Make a visual graph to help him track his savings for a special goal. Break it down into smaller goals. If he needs to save a 100 $, break it down into 20 steps of 5$ each, which are colored as they are achieved.
Skill#4 BANKING – get her an account, pronto
Many banks offer special accounts for children above a certain age. The ‘special features’ enable your teen to take her first steps towards financial freedom while remaining under your care and supervision.
Which provider you choose for your child’s account will depend upon the degree of financial independence you want to grant her. Do you want her to have an independent debit card which she can use online and in shops? Or do you want her to have an ATM card that allows them to withdraw cash at ATM machines? Or, maybe a prepaid debit card which allows her to spend only the amount that is loaded on to the card.
Whatever you choose, it is the financial skills that your teen learns that are important.
If your child is between 13-15 years old, they ought to know:
- the difference between a checking and a savings account,
- they should know how to bank a check,
- understand how money makes money or the basics of interest.
For the older teenagers, those who are beyond 15 years
- Understand that a debit card is the same as cash.
- Online banking
- Concepts such as interest rates, withdrawal limits, and fees.
- Writing a Check
- Making a Deposit
- Checking balance and transactions online regularly.
Your ADHD Teen
Go ahead and open that account for her.
Help her develop a system to keep track of account balances and savings.
Find a special place in the house where she can store financial papers in an organized manner.
Skill#5: UNDERSTAND CREDIT – it is a beast that needs to be tamed
This is the time to help your teen understand the risks associated with credit – especially a credit card.
Your teenager is only a few years away from getting credit cards. Let him understand how they work.
It is your responsibility to show it to him. Use one of your actual transactions to make it real.
Let him also know what happens if you do not pay the credit card bill. He should know that even small purchases can become costly if the payments are stretched over a long time.
Your ADHD Teen
ADHD teens need visual representation.
Swipe the card in front of him. Make sure he knows the amount and what it is for. When you get your monthly bill, point out the amount to him as a part of the total. Write out the check and send it to the card issuing bank in his presence. Then, when the debit entry appears in your account, let him know that it is paid for. Take him along an entire transaction with you.
With proper guidance and the necessary tools, your ADHD teen will be equipped with the financial skills she needs to go to college and then onto the world outside. What say?
If you have any questions or thoughts, leave them in the comments below.