Making Allowances - Article - First Job - First Pay

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	Featured Media Article FIRST JOB - FIRST PAY - FIRST MONEY LESSONS TORONTO (CP) Most teens leave school behind for the summer and use their free time to earn - and spend - cash. But even though they're not in the classroom, some of life's most valuable lessons will come from those first precious paycheques. And their parents, financial advisors say, should be their teachers. While parents might not think that proceeds from an $8-an-hour McJob necessitate financial counselling, people who advise teens and their parents on money matters call for as much communication as possible when it comes to earning, saving and spending. Paul Lermitte, an author and advisor with IFC Planning and Assante Financial Management in Vancouver, says parents should encourage their teens to tell them how much they're earning at a summer job - and what they're doing with that money. ``Parents need to be there to assist,'' said Lermitte, who has three teenage sons, from 15 to 19 years old. ``The parents don't have the right per se to tell the kids what to do, but they should be trying to give guidance.'' Just like adults, kids should set financial goals, such as paying for a spring break vacation, buying a used car or a new pair of skis, Lermitte said. Saving for attainable, near-term expenses is a good way to get teens to see the power of putting off impulse purchases in favour of buying something meaningful down the road. But telling them to put away a certain percentage of their earnings for a rainy day usually doesn't work too well with teens. ``By just saying they should save 20 per cent of their income, there's probably 20 per cent of the kids who will do that,'' said Lermitte, who has authored a book called Making Allowances: A Dollars and Sense Guide to Teaching Kids About Money. ``Eighty per cent will just say, `Oh, yeah. Good thought.' In one ear and out the other.'' Parents should sit down with their young earners to figure out a budget, including how much the teen earns, how much they plan to save, and for what, and how much they can blow on movies and amusement parks. They should take into consideration that benefits and deductions will eat into a paycheque _ a new concept to most young earners, Lermitte said. When it comes to long-term saving, Helen Cunningham, an author and financial planner in Ottawa, believes kids are ready to start an RRSP as soon as they're earning money regularly. Preparing for retirement shouldn't be an obsession for 15-year-olds, Cunningham said, but contributing a little money to a plan regularly will show a teen the value of compound interest. ``The more a child saves, the more they see this money building and the more excited they get and the more they want to save,'' said Cunningham, who wrote A Quarter in Your Piggy Bank, Teaching a Child to Manage Money. While ``retirement is a very long way off for youngsters,'' they should know that they can borrow up to $20,000 tax free from their RRSP for a down payment on their first home, or use it for their education, Cunningham said. Lermitte, however, said he sees little point in contributing to an RRSP before someone is working full time. ``You can't get a teenager excited about something that's going to happen 50 or 60 years from now,'' Lermitte said. ``We don't get most of our adult clients really juiced about it until age 45.'' As well, most teens pay very little in income tax, so the tax shelter RRSPs provide isn't necessary. No matter how much they're saving, teens can almost always be counted on to stray from their well-crafted plan when they first see the money rolling in. ``Usually in the first few months when a child gets a job, they get all this money and they just go wild and they spend it foolishly,'' said Cunningham, who has had parents come to her in tears over their kids' reckless spending habits. ``I say, give (kids) a chance and instead of criticizing them say, `You made a choice, live with it.''' Lermitte agreed that over spending can be a good lesson for teens, and one that they should learn early, when the stakes aren't as high as they are for adult-sized expenses. ``If they learn how to spend money while they're young and they make mistake, and lots of them, they learn from those mistakes,'' said Lermitte. Common mistakes for teens with too much hard-earned money burning up their pockets include buying an expensive item and finding it on sale two weeks later, buying a cheap item and finding that it falls apart two weeks later, or buying something on impulse and then deciding that they don't like it. Lermitte's most enduring piece of advice is that young people are resilient, have lots of energy and can put in the long hours earning as much money as they feel they need for their lifestyle. His 19-year-old son found that he wasn't earning enough working part time in the summer after university, so he picked up another job. ``I told him, `You should be working six days a week, 10 to 12 hour days,'' Lermitte said. ``There's lots of sleep time and lots of play time, this is your time to work.'' Site contents © by Paul W. Lermitte	FEATURES

Making Allowances

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Featured Media Article

FIRST JOB -

FIRST PAY -

FIRST MONEY LESSONS

TORONTO (CP) Most teens leave school behind for the summer and use their free time to earn - and spend - cash. But even though they're not in the classroom, some of life's most valuable lessons will come from those first precious paycheques. And their parents, financial advisors say, should be their teachers.

While parents might not think that proceeds from an $8-an-hour McJob necessitate financial counselling, people who advise teens and their parents on money matters call for as much communication as possible when it comes to earning, saving and spending.

Paul Lermitte, an author and advisor with IFC Planning and Assante Financial Management in Vancouver, says parents should encourage their teens to tell them how much they're earning at a summer job - and what they're doing with that money.

``Parents need to be there to assist,'' said Lermitte, who has three teenage sons, from 15 to 19 years old. ``The parents don't have the right per se to tell the kids what to do, but they should be trying to give guidance.''

Just like adults, kids should set financial goals, such as paying for a spring break vacation, buying a used car or a new pair of skis, Lermitte said.

Saving for attainable, near-term expenses is a good way to get teens to see the power of putting off impulse purchases in favour of buying something meaningful down the road. But telling them to put away a certain percentage of their earnings for a rainy day usually doesn't work too well with teens.

``By just saying they should save 20 per cent of their income, there's probably 20 per cent of the kids who will do that,'' said Lermitte, who has authored a book called Making Allowances: A Dollars and Sense Guide to Teaching Kids About Money. ``Eighty per cent will just say, `Oh, yeah. Good thought.' In one ear and out the other.''

Parents should sit down with their young earners to figure out a budget, including how much the teen earns, how much they plan to save, and for what, and how much they can blow on movies and amusement parks. They should take into consideration that benefits and deductions will eat into a paycheque _ a new concept to most young earners, Lermitte said.

When it comes to long-term saving, Helen Cunningham, an author and financial planner in Ottawa, believes kids are ready to start an RRSP as soon as they're earning money regularly. Preparing for retirement shouldn't be an obsession for 15-year-olds, Cunningham said, but contributing a little money to a plan regularly will show a teen the value of compound interest.

``The more a child saves, the more they see this money building and the more excited they get and the more they want to save,'' said Cunningham, who wrote A Quarter in Your Piggy Bank, Teaching a Child to Manage Money.

While ``retirement is a very long way off for youngsters,'' they should know that they can borrow up to $20,000 tax free from their RRSP for a down payment on their first home, or use it for their education, Cunningham said.

Lermitte, however, said he sees little point in contributing to an RRSP before someone is working full time.

``You can't get a teenager excited about something that's going to happen 50 or 60 years from now,'' Lermitte said.

``We don't get most of our adult clients really juiced about it until age 45.'' As well, most teens pay very little in income tax, so the tax shelter RRSPs provide isn't necessary.

No matter how much they're saving, teens can almost always be counted on to stray from their well-crafted plan when they first see the money rolling in.

``Usually in the first few months when a child gets a job, they get all this money and they just go wild and they spend it foolishly,'' said Cunningham, who has had parents come to her in tears over their kids' reckless spending habits. ``I say, give (kids) a chance and instead of criticizing them say, `You made a choice, live with it.'''

Lermitte agreed that over spending can be a good lesson for teens, and one that they should learn early, when the stakes aren't as high as they are for adult-sized expenses.

``If they learn how to spend money while they're young and they make mistake, and lots of them, they learn from those mistakes,'' said Lermitte. Common mistakes for teens with too much hard-earned money burning up their pockets include buying an expensive item and finding it on sale two weeks later, buying a cheap item and finding that it falls apart two weeks later, or buying something on impulse and then deciding that they don't like it.

Lermitte's most enduring piece of advice is that young people are resilient, have lots of energy and can put in the long hours earning as much money as they feel they need for their lifestyle. His 19-year-old son found that he wasn't earning enough working part time in the summer after university, so he picked up another job.

``I told him, `You should be working six days a week, 10 to 12 hour days,'' Lermitte said.

``There's lots of sleep time and lots of play time, this is your time to work.''

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