More dollars than sense

Teenagers are earning and spending as never before. The words "disposable income" have taken on vivid new life for many parents, as they watch their children earn as much as £30 to £50 a week - only to blow it almost right away on the latest must-have tops, trainers, trousers, scents and CDs. Teens with a sizeable income may save parents some money, but they make a lot of us uncomfortable too. What will happen when our children go out into the real world and find they have bills to pay? Are we doing enough to to train our teens to save as well as spend? Should we look for a contribution to the domestic economy, as we probably will when they are earning full-time?

And if we insist that kids give up work so they can study harder, who picks up the tab?

"Are you going to give me money then?" one daughter moaned to her mother in the middle of a recent discussion on giving up her weekend supermarket job. "I mean, a night out costs at least £20. And when was the last time you bought me clothes?"

A short discussion on the concept of deferred gratification went only a short distance to persuade the girl that riches to come were worth a year of poverty now.

Many parents are initially grateful that their children are buying most of their own clothes, leaving them having to pay for only the odd winter coat, or expensive items for birthdays. But after a while, they realise that many teenagers simply have no concept of the idea of "enough" clothes as they shop, shop, shop 'til they get their consumer fix.

Sensible parents have always tried to instil good financial habits in their children, of course, and many young children have gone through their Henry Hippo stage, thrilled at the excitement of having a real bank account.

But, somehow, the concept of saving a large portion of their income goes out the window when they start earning serious money in their mid-teens.

Marketing people will tell you that teenagers, with loads of dosh earned from summer and weekend jobs to spend on themselves, are a really hot market at the moment - and arguably, an important part of our lively economy too. Youthscape, a recent survey of 12- to 18-year-olds carried out for IAPI (Institute of Advertising Practitioners in Ireland) spells out just how much money many teens have.

The average weekly disposable spend was just under £20 - but while 12- and 13-year-olds had just £6 to £8 a week to spend, 17 and 18-year-olds spent between £29 and £45. Interestingly, boys had more money all along, with the difference most marked at 17-plus, when girls' average weekly spend only came to £29.66, while boys' was £45.50.

Pocket money was by far the main source of income for 12- to 16-year-olds; by age 17-plus, a majority of boys (55 per cent), and 43 per cent of girls had some regular income from work.

And what do these high-earning older teens spend their money on? Well, 17-plus boys spend an average of £650 a year on clothes alone, while girls (surprisingly) spend less - a mere £500 a year. Otherwise, the biggest spend is on food and drink, with going to clubs, renting videos and going to the cinema taking up a lot of what's left of their cash.

Okay, the survey does prove that teenagers don't really spend the equivalent of the GNP of a small Third World country in a year, even if it sometimes seems that way. But it does highlight the need for teenagers to learn some financial sense before it's too late. Maura Dowling of the Carlow office of the Money Advice Budgeting Service (MABS) says: "I would have concern that they'll have to learn the hard way. We do have people in their 20s who've left home and come in to us for help after they've run up large debts, on credit cards, bank accounts or mobile phones - the menace of the day."

She agrees that practical money management should be included in the school curriculum from an early age: although there's a certain amount of this covered in classes like civics, or in home economics and business, it seems to get fairly cursory attention in schools. MABS does a small bit of educational work, giving talks to Transition Year pupils, for example, or to early school-leavers.

However, as with most other values, financial values are best learned at home. Says Dowling: "If parents are thrifty, children will be too. Parents should work to a budget - and should introduce their children to it, so that they know the ESB bill costs this, the telephone bill that."

Certainly children need to learn about handling money from the time of their first Communion, when many will get cash gifts adding up to hundreds of pounds.

Personal finance journalist Jill Kerby, co-author of The Tab Guide On Money, Pensions & Tax 1999- 2000, has some very practical advice on how to teach teenagers basic money management. Ideally, every family should do its budget at least once a year, collecting all its bills, all its receipts, totalling incomings and outgoings to get a clear picture of where it stands financially. (Many families may have put this information on computer so that they can update the picture regularly.) This useful exercise often reveals, rather scarily, that we are living beyond our means.

If you discover that you're regularly overspending your income by, say 10 or 15 per cent, you should implement your own across the board budget cuts, Kerby says. "Say you have to cut annual family spending by £2,000 - drag the kids in and involve them in deciding on the cuts. For example, if you're spending £6 a week on biscuits that neither of the parents is eating, you could say, well, if you want them, you buy them. Or you could look for a contribution to the phone bill - say, £10 a week."

What teenagers contribute will only be a token, so Kerby advises parents to leave diligent young savers alone. But if your child is a typical teenager who blows cash on CDs and clothes, then it's a good idea to give them experience of having to pay for some of the basics.

As well as that, there is the basic rule of "one-third, one-third, one-third" which many families inculcate into their children from the outset. One man recalls that his mother implemented this rule from the time her children started earning money, even part-time: she took a third of their weekly income (whether they earned £30 or £300), made them put another one-third into a savings account, leaving them a third to spend.

And you never know - those of us who are always in the red might learn something useful about managing our own money while we're trying to teach our children some financial commonsense.