“Beware of little expenses; a small leak will sink a great ship” – Benjamin Franklin

Earlier this summer, our almost-14-year-old began her own journey through financial implosion.  At the end of June, my wife and I learned that our daughter had spent every penny she had saved in her bank account and was completely out of cash.  This teen money catastrophe also happened to coincide with a change in our allowance policy, which has made for a somewhat impoverished summer for our child.

Our old program rewarded our kid with monthly pocket change just for breathing.  It was designed with the hope that she’d gain some money handling experience, and wasn’t based on homework, chores, or good behavior.  The new system, which was designed in hopes of encouraging good behavior and chores, is performance-based.  In other words, a lack of chores and good behavior equals no allowance.

So far, the new system has been great for our cash flow, but not-so-wonderful with regards to encouraging our daughter to behave appropriately or to complete her chores.  In the two months we’ve had this system in place, we’ve paid exactly zero dollars and zero cents in allowance.  Although we might have to pay this week, it’s been a bargain for us.

Obviously, the system isn’t working quite as well as we’d hoped.  We are learning that teaching money management skills to children isn’t so easy.

Naturally, as our daughter’s pockets have been emptied by her self-induced summer recession, she’s been trying to convince us that we should pay for things she normally would have bought for herself.

The most recent example was when our daughter tried to convince us that her shoes were too small, and that she needed another pair of sneakers.  A toe check quickly revealed that her shoes fit just fine, and that the real issue was that she wanted another pair.

Just like most parents of teen girls, I’m worried that my daughter is going to turn into the next Imelda Marcos.  A recent check revealed she has seven pairs of athletic shoes, two pairs of dress shoes, a pair of slippers and at least three sets of flip-flops in the debris field known as her room.  In comparison, I own two pairs of falling-apart athletic shoes, one 20-year-old pair of dress shoes, and one pair of flip-flops, while my wife owns one pair each of dress, casual, and athletic shoes, plus the requisite pair of flip-flops.  Our daughter definitely doesn’t need any more shoes.

Trying to explain the difference between wants and needs to our daughter has been a challenge.  The teen brain, with its immense desire for immediate gratification, seems to have difficulty differentiating between the two.  Our staunch refusal to purchase any more shoes was greeted by an angry stomp of a teenage foot with the wail, “you never buy anything I need!”

Since our daughter’s angry outburst, we’ve tried to spend time with her explaining the difference between wants and needs.  After some thought, we came up with the following definitions:

  • A need is something that you cannot do without.  This includes food, shelter, basic clothing and school supplies.  You’ll starve if you have no food, you’ll freeze if you have no shelter, you’ll likely get arrested for indecent exposure if you have no clothes, and you’ll get in trouble at school if you don’t come equipped with paper and pencil.
  • A want is something you desire, but you won’t starve, die or get in trouble if you don’t have it.  The world isn’t going to go spinning out of orbit and crashing into the sun if you don’t have eight pairs of sneakers instead of seven, nor will the sky fall in if you don’t get a new backpack, pair of jeans, or notebook when you have others that are still serviceable.
  • The difference between teen wants and needs are that parents always pay for needs, but only occasionally pay for wants.  We will pay for food, shelter and basic clothing, but the eighth, ninth and tenth pair of athletic shoes won’t come out of our budget.

Since we’ve defined wants and needs, our daughter has somewhat reduced her demands.  When she asks for something, we always answer with the question, “is this a want or a need?”  This forces her to consider this very important concept while she’s still young, so she can be better-equipped to avoid financial disaster as an adult.

Next in series: You Won’t Miss it After All

Photo credit: stock.xchng