Teen spending ? when she has plenty of money

[disneysteve]

it's all about what we've done in the past which was educated her on the value of money and being a responsible teenager at the same time.

Same here. We've been financially educating her for years. I guess now is when we start seeing how much of that really sank in. And we'll keep at it, as always.

[LuxLiving]

IMHO, at some point balancing a checkbook would be important and understanding how interest adds up in a savings account. Making a spending plan, etc.

[SnoopyCool]

I can only speak of what I wish I would have learned in my teen years, and that is how to responsibly spend money - having a budget, etc. Does she know how to spend responsibly? How much does she have to take care of herself on her own dime? My parents allowed me to earn my own money, but I often didn't know what was coming down the pipes and was unprepared (i.e., car insurance). She can learn some of that through proxy with you guys, but it will drive it home if she can do it herself. Whatever is appropriate for a 13 y.o., of course.

[disneysteve]

IMHO, at some point balancing a checkbook would be important and understanding how interest adds up in a savings account.

That stuff is already taken care of.

She has been balancing our family checkbook for about 3 years (since she was 9 or 10). It started as an arithmetic exercise but naturally grew into conversations about how costly it is to run our household, how much comes in and where it all goes.

[jIM_Ohio]

Good posts, Jim and Johnstone.

snafu, she knows that she will be expected to pay some of her college costs. She also knows that we are saving for her education. It will be a joint effort.

Let me add one more-

planning a large financial transaction (like a vacation) which has money going to numerous different people providing a needed service. The details of getting costs like that minimized takes experience.

[moneybags]

She can't start an IRA/Roth because none of this is earned income. It is all gift money from her Bat Mitzvah in September.

I would think about having her put a big chunk away not to be touched for every day use - movies, etc. She can learn to budget the smaller amount for her expenses. I've done this with my kids' large sums of money. They got a small amount in their savings accounts and the rest is off limits for now.

Maybe down the road when she does get a job, she can transfer some of this to an IRA and spend her paychecks.

[disneysteve]

I would think about having her put a big chunk away not to be touched for every day use

That was pretty much the plan - put a big chunk into a CD and/or other investment to earn better interest (which she totally understands) and just keep the rest in savings for whatever comes along.

[Ima saver]

I started working at age 12 (there were no IRA's back then) I was expected to save up and pay for my own car, it's upkeep, gas and insurance. I am sure she will want a car when she gets her license.

[zetta]

I'd suggest buying both a 1-yr CD and a balanced mutual fund, and putting $2k or $3k in each. Over the next 5 years, you can have lots of discussions about risk and volitility and dollar cost averaging and how to choose mutuall funds.

Perhaps also help her set saving goals for 5 years and 10 years away (rougly corresponding with finishing high school and finishing college.)

[jIM_Ohio]

I'd suggest buying both a 1-yr CD and a balanced mutual fund, and putting $2k or $3k in each. Over the next 5 years, you can have lots of discussions about risk and volitility and dollar cost averaging and how to choose mutuall funds.

Perhaps also help her set saving goals for 5 years and 10 years away (rougly corresponding with finishing high school and finishing college.)

I was thinking something similar. The only way one understands risks is to actually put money into the risky investment.

[TBH]

Sounds like you've prepared her very well. I especially like the idea of having a kid balance the checkbook. What a great way to see how much money is coming in and how much stuff actually costs. That's such a hard thing to learn when you are first supporting yourself--how much it costs just to live.

As a young teenager I had about $1200 in a savings account. Some of it had come in the form of gifts--$25 here and there for birthdays from grandparents. But most of it was from babysitting. I think earning the money myself really helped me learn how to be a saver. For some reason if I had earned it myself it was harder for me to spend it than if it was gift money. I babysat A LOT as a young teenager, although I didn't have any kind of regular job til I got to college.

I would say working is the next step in her financial education. She could make flyers about her babysitting or dogwalking services and give them out at your synagogue or something.