Financial education

I have a teenage son (age 13) and, like most parents, I find the continual expenses 'demanded' by teenagers never-ending. I give him an allowance each week to spend on whatever he likes, but I separately fund any additional expenses, such as trips and clothing. I am concerned that my son has no sense of budgeting for expenses and wonder whether a different approach should be adopted.

The financial future for teenagers may in some respects appear pretty daunting. Overpriced property prices, which in turn require mountainous loans and escalating university costs are just round the corner for a 13-year-old.

In the longer term, one can expect the teenagers of today to be expected to fund their retirement entirely on their own. In today's environment, the younger that children learn about the real value of money the better. That way, children may be educated into understanding the long-term benefits of saving and the dangers associated with borrowing.

One option you may wish to consider is to give your son a weekly or monthly allowance that will cover all routine expenses. To do this, you must first record all expenses incurred by him over a month - including every bus fare and bar of chocolate.

You should then sit down with him and discuss what you both feel are justifiable expenses. You then agree on an extra allowance for treats and there you have the monthly allowance.

It is then up to your son to budget for the month ahead - carefully recording where he spent the allowance and ideally making sure he does not overspend. If he achieves this with some money spare at the end of the month, then he is well on his way to becoming a saver of the future.

The next step is to discuss what he does with the left-over allowance. If, for example, he plans a weekend trip in a few months' time, then you can explain to him how he can afford the trip by carefully sticking to his allowance and budgeting accordingly.

In essence, this is how adults budget. You are merely educating your child early enough in life to make it easier for him to budget for later in life.

One word of warning though: you cannot expect this system to be perfected on day one. It is all about setting the ground rules and helping him through the process. I am sure you wouldn't let your child starve if he gets it wrong!

Bank accounts are a good idea and opening an account is easy. I remember being given savings stamps when I was a young child and in turn being given a passbook with a building society with £5 - this seemed a fortune nearly 30 years ago.

Financial education should start as young as possible. Research shows that those who save early in life are most likely to save for larger expenses in the future as opposed to taking out a loan to cover the expense. Educating your children to think this way can therefore have greater long-term benefits.

Address any financial questions to: Mark Hollingsworth, c/o The Sunday Times, PO Box 328, Valletta CMR 01. Alternatively, he can be contacted on 2137-8627/9984-2614 (office hours) or e-mail mhollingsworth@waldonet. net.mt.

Past performance is no guide to the future and, except where amounts are guaranteed, the price of your investments (and the currency in which it is denominated) may fall as well as rise. Malta exchange control regulations must be observed. Your personal tax situation will depend on residence. Always consult a professional adviser. This article does not intend to give investment advice and its contents should not be construed as such. Readers are encouraged to seek professional advice on their personal financial situation.