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To Get Kids To Save Their Summer Money, Turn To 'Simple Lessons'

MICHEL MARTIN: I'm Michel Martin and this is TELL ME MORE from NPR News. By this time, you're probably settling into a summer routine for a lot of people that means trips to the beach or the pool. If you have a child, especially a daughter who seems very concerned with how her body looks right now and swimsuit season is pushing that button even more, we hope you'll stick around for our parenting conversation later this hour because we're going to talk about how to deal with that. But first, we were thinking about the fact that for a lot of teens summer means a first job and this could be a good opportunity to hear some lessons about financial management and discipline. I sat down with money coach Alvin Hall earlier to talk about this and asked whether parents should have a conversation with the teen about how the money will be used before the job starts.

ALVIN HALL: Yes. They should be having a conversation about the importance of saving money. You can spend part of what you own, but you need to also save part of the money you earn so that you can build something toward the future.

Most parents think that kids are fairly naive about money or learning the lessons early on, but in reality, kids have been observing the parents' actions all along. And talking about savings and making it as a priority is very important.

MARTIN: You know, there are people who have the argument that letting your kid make the wrong choices about money or just kind of figure it out for themselves, particularly with that summer paycheck, is really the best way to let them figure it out for themselves because if they, say, blow it all on sneakers in the first week and then have to borrow money for the bus, then that's a powerful lesson. What do you say to that?

HALL: I say that is a powerful lesson, and they're going to make that mistake whether you are on message or not. So you can say, save, save, save, but they may choose not to. If they fail, let them fail, but do not try to pick up the pieces for them because they will gain the wisdom for that failure. But it's important, Michel, for the parents to be consistent in the message that they give the child.

MARTIN: Well, what do you mean by that? Like, tell me a little bit more about that.

HALL: So although the child may not be saving, you need to say, why aren't you saving? You know, this is important. You can spend part of your money, you can save part of your money. What are you using the money to - what are you spending your money on? Have you set priorities? I think it's important for parents to ask simple straightforward questions. The child may not have the types of answers that the parents want, but it will at least start them to think about these things.

MARTIN: Well, you know, I have to tell you that - and I'm sure you know this - that a lot of people will just find this very conversation ridiculous, you know...

HALL: I know (Laughing).

MARTIN: ...Because in a lot of cultures it's just assumed that a child is going to turn that paycheck over to the parents.

HALL: Oh, I know.

MARTIN: Right, that's just an assumption. So even if you are not part of that kind of mindset, do you think that parents should enforce savings? I mean, do you advise parents just to make it a rule?

HALL: Yes. I do advise parents to make it a rule, but don't be surprised if your child decides to rebel in some way, in some small way, to show their independence. But I do think it's a rule. But I was raised where I had to contribute to the household. When I got my first job, my mother made it imperative that I had to give her part of my money, and I did not like that at all.

But from that, I learned a very, very important lesson that became useful to me many years later. And that was about how to allocate my money. My mother and I, we would often just sit there and I would steam when I would have to give her my money that I had worked so hard for. But in the long term, it did prove to be a very, very good lesson about how to allocate my money toward necessities and then use the rest of it to get some of the things that I wanted.

MARTIN: I'm wondering if you have some opinion about how much of that should go into kind of the family pot. I mean, 'cause some kids really - literally do turn over the entire paycheck. I mean, do you think that that's OK, or do you think that kids should - this is kind of a lesson for parents now - do you think that you should allow the child to have some of that money for himself or herself?

HALL: I think it's fair to allow the child to have some of that money for themselves. After all, they're going out, they're doing the work, they should have some of the reward from that. My mother would've argued, your reward is living in my house, and I understood that. But over time, we negotiated it so I did get to keep some of the money. And I think that's fairer to the child.

MARTIN: How much?

HALL: And also...

MARTIN: How much? Do you have a rule of thumb about that?

HALL: ...I think you negotiate that. No. I think you negotiate that depending upon the family's needs in the end, and how much you think the child will need day-to-day. So letting the child keep a quarter of that money or half of that money seems to me within the realm of reason. Anything less than a quarter or 20 percent seems almost churlish and unfair to the child who's actually going out and doing the hard work.

MARTIN: What about the other side of that question which is, families who are affluent, who don't need the child to contribute to his or her basic support. Do you have some thoughts about how that should be handled? I mean, I know a lot of kids, for example, you know, my working assumption is a lot of kids, what they want that summer job for - I mean, some kids look, it's clear, you are saving for college.

HALL: Yes.

MARTIN: You might not be saving for food and shelter, but you're definitely saving for college.

HALL: Yes.

MARTIN: But for kids for whom it's maybe not as pressing a concern, do you have an opinion about how that money should be spent or what kinds of conversations those families should be having about that money?

HALL: I do have an opinion about this because I have several friends who have children who are in exactly this situation. The parents are very well to do, they work on Wall Street, they own companies, so the child saving for college is not an issue. What they mostly talk about it is, what are your priorities? What do you want to buy with this money? What goals do you have with this money? And they sit down with the children and they talk about what things are important to you to buy with this money. If they want to use it to go to concerts, that's fine. If they want it to use it to take a trip with friends or a field trip, that's fine. But they have the children set some goals, both short-term for the summer and perhaps some longer-term goals, so they have a little money sitting there for opportunities that come up during the school year that the child may want but the parents may not want to pay for.

MARTIN: I do have to ask you though, about people who might be listening to our conversation and might be saying, you know what, I'm not that good with money either.

HALL: Michel, when you mention this, I had this completely autobiographical flashback to my childhood. My mother once inherited some money and within six to eight weeks the money was gone. I still remember my grandmother looking at my mother and just shaking her head that my mother had spent all this money. My money - my mother was very bad at handling money.

And sometimes it's best for you, the child, to look at another relative. So I looked at my grandmother, I looked at an uncle, and I looked at a family friend who was a better person at managing money. And sometimes I would actually talk to my grandmother about - why do you think my mamma is so bad with money? And my mother would say - my grandmother would say - she doesn't like to think about it, and - but you need to learn to think about money. So it was from those simple lessons, by looking at family friends and other people in your community, that you can learn good takeaways.

MARTIN: That was author and financial educator Alvin Hall. We spoke with him from New York City. Transcript provided by NPR, Copyright NPR.