Robyn Pearce: How can we teach teenagers to manage money?

How do we all learn? By experience. Being dished out pocket money didn't seem to be teaching him anything. Photo / Thinkstock

'You're a tough grandmother,' said one of my sailing mates a couple of weeks ago.
Here's what I'd just explained to him. What do you think?

My oldest grandson, aged 18, whilst sitting at my dinner table about four weeks ago, suddenly said, 'I'd like to come and live with you, Robbie.' His parents are on an overseas posting for three years so he'd been boarding with his other grandparents for the latter part of last year. They've been very good to him but I sensed that all parties were happy to consider a change.

I replied, 'Sure you can, and here's the deal. I'll be a grandmother when I need to, but let's think of it as a flatting arrangement as much as possible.' My rationale - because his money management skills are very haphazard he would struggle financially once he left school and went into a normal flatting situation. Therefore, the best way I could play my part in helping to equip him for his rapidly looming future was to help him learn to manage money in a safe and supportive environment.

We'd been on holiday together over the previous six weeks and I'd watched pocket money slip through his fingers, wasted on seductive non-essentials and rubbish such as chips and coke.

Also, there seemed to be no savings habit. I'd been party to a number of hopeful conversations which started along the lines of: 'I really need a computer, or better lenses for my camera, or .... '. Then would follow a pregnant and hopeful pause - would the Christmas Fairy (alias the listener) stump up with the goods? Saving for big items didn't appear to be on the radar.

How do we all learn? By experience. Being dished out pocket money didn't seem to be teaching him anything.

So, over the dinner table we nutted out the following arrangement. He would receive the full dependent child boarding allowance paid to his parents ($245 per week), pay me a small rent of $70 (below market rates), $30 for ancillaries (power, water and internet), buy and cook his own food, and whatever was left over was his for savings, incidentals and anything else.

In the last two weeks there have already been some 'learning' opportunities and no doubt there are more to come, but the experience is proving to be very educational. For instance, the first week he had to pay board he thought it was paid at the end of the week. We all know what happens if we think we'll pay bills with what's left over. Sure enough, he'd spent almost all the money. Solid work in the garden paid that week's board and he had to feed himself for a week on $36!

He has now set up an automatic payment to pay his commitments first. Even that has been a little challenge - he accidentally paid me too much this week and had nothing left in his bank account to buy an art book for school. (I did pay it back!)

The next step is to set up sub-accounts so his food and a small % for savings go into different accounts as soon as he receives his money. Anything left over is his to use as he wishes. We're also looking for part-time jobs so he can save for those bigger items.

Back to the shocked fellow sailor. 'You're not making him pay board!' he said in disbelief. 'Surely you're pulling my leg! Isn't the role of grandparents to be soft and kind, and to spoil their grandchildren?'

'No way,' I replied. 'How can a young man, right on the edge of adulthood, learn if he's treated like a little kid, with pocket money coming of right, no incentive for saving and someone else (in this case me) making all the fiscal decisions? In fact he's in a safe and protected environment to learn responsibility. I won't let him starve, I don't growl (or not often!), and I'm guiding and teaching him. I know he'll make mistakes - that's how we all learn. He has to be able to manage on his own by the time he leaves school at the end of this year.'

My philosophy: We have to be tough to be kind. If we over-protect our young ones we damage them.
What do you think? How have you helped your teenagers step into adulthood?

Robyn Pearce (known as the Time Queen) is the MD of GettingAGrip.com, an international time management and productivity training company based in New Zealand. Get your free report 'How To Master Time In Only 90 Seconds' and ongoing time tips at www.gettingagrip.com

For more on NZ business ambitions go to www.businessambition.co.nz