Ages 11–13: Dealing with Peer Pressure and Learning to Plan

Keeping up with “everyone else.” During the middle-school years, and even before, “what’s hot, and what’s not” is an enormous enticement for spending. You really can’t control peer pressure. But by the time your child is around 11, he should know about ways to make money (allowance, extra jobs) and how to spend it wisely (savings, planned expenses.) If you’ve been paying him interest on savings, she has a rudimentary grasp of the time value of money. With this background, you may notice him beginning to have the independence and self-confidence to make his own judgments. Continue to allow him to make decisions on his own, even if it means he sometimes spends money on the latest fad.

A good time to introduce the “magic of compound-interest.” Make a game of this by looking at a compounding interest rate chart with your child. To illustrate the power of compounding, show your child how a dollar grows over various periods of time at various interest rates. Then show what happens if you increase the amount to $100. Kids get excited when they see how well they can do.

Pacing spending. Review your child’s allowance with him to see that his “income” covers what you expect him to pay, adding items when necessary. Lengthen the time between giving out the allowance—say to once every two weeks—so that he can learn to pace himself. If your child runs out of money before the end of that time, you might lend him some, but insist he pay it back from his next allowance. Keep careful records and be consistent about his allowance day. Otherwise, he’ll get used to you bailing him out, and the opportunity for him to learn more about money management will be lost. If he continually runs out of money, don’t rescue him. This is a good time to introduce your child to the concept of a spending plan, or a budget.

Budget talk. Talk to your child about budgets and ways to live within one. Show how the family budget works. Keeping track of expenses and living within a spending plan is hard for most people, so don’t expect immediate comprehension from your tween. What you’re working on now is laying a foundation for understanding. Look for teachable moments. Be observant and notice what your child truly wants. When the time is right, talk about how he can achieve what he desires. It would be helpful to have him determine how much he needs to save each week in order to reach his goal in a given amount of time. As he learns to plan and prioritize, he’s learning the skills needed for a more formal approach to budgeting.

Introduce and explore market concepts. It’s easy to get basic investment information. There are many quality websites and books on investing, some written specifically for young people. Talk to your kids to see what they already know. Also, go over basic investment principles such as setting investment goals and diversifying investments to reduce risk. Buy your child a small amount of stock in a company he recognizes and help him track it—or do this using fictitious “money,” just for the fun of it.

Paul Golden is the communications manager for the National Endowment for Financial Education (NEFE), a nonprofit foundation dedicated to improving the financial well being of all Americans.