University of Wisconsin - Extension

A summer or after-school job can be a great way for teens to earn their own pocket money and start paying for a few of the items they want -- compact disks, movie tickets, fast food and clothes. In addition, a job teaches young people how to manage money, set

financial goals, and separate wants from needs while they gain independence.

"Most young people don't automatically understand the basics of money management," says Linda Boelter, University of Wisconsin-Extension resource management specialist and Oneida County family living agent.

She says research shows that many teens experience "premature affluence" because they are not responsible for basic expenses, such as rent, food or utilities while living at home. All their income can go toward non-essentials like music, health and beauty aids and recreation.

"Parents can help teens learn how to better manage their money by giving them opportunities to make choices and learn from the experience. One way to start is by helping teens develop more realistic spending habits by making a spending plan," she said.

To develop a spending plan, first calculate expected income, including money from jobs, allowances, gifts and other sources. Then, identify longer-term goals such as a big trip, a car, stereo equipment, or saving for college. Next, figure out how much you need to save each week to reach your goals and how much money can be spent in other categories.

"Like many adults, teens often don't know where their money goes," Boelter says. She said it's a good idea to keep a log of all spending for a few weeks to get an idea about where the money is going.

One important concept is the idea of "paying yourself first," or putting money into savings each pay period before beginning to spend.

Here are some money skills that teens need to learn:

• How to balance a checkbook

• How to make deposits and withdrawals from an ATM machine.

• How to do the grocery shopping - including writing the list, checking

• the sale ads and making purchases within a pre-determined budget.

• How to manage a credit card account.