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Dan Furlan, left, and his son Lukas pose in their Etobicoke home, February 18 2012. Lukas repaid his dad for his $300 hockey stick by doing house chores. (J.P. Moczulski for The Globe and Mail) (J.P. MOCZULSKI)
Dan Furlan, left, and his son Lukas pose in their Etobicoke home, February 18 2012. Lukas repaid his dad for his $300 hockey stick by doing house chores. (J.P. Moczulski for The Globe and Mail) (J.P. MOCZULSKI)

Household finances

Early teen years a prime time for learning financial sense Add to ...

Lukas Furlan loves hockey. And he loves to play with high-end gear. Last fall, when he was shopping for a hockey stick with his father, the two didn’t see eye to eye on the budget. Dan Furlan, a lawyer who grew up in a modest bungalow in Scarborough, thought $100 was generous. Lukas, age 14, however, had his sights set on a state-of-the-art Kevlar-wrapped carbon stick, for a distinctly immodest $300.

After some heated negotiating, the pair came to an agreement. Lukas could get the fancy stick. Mr. Furlan would put in $100. Lukas would work off the balance doing chores around the house.

This kind of arrangement is a great learning opportunity for a young teen, according to Alyson Schafer, a family psychotherapist, based in Toronto.

“Because of brain plasticity, the early teen years are a crucial time to learn financial lessons. The pathways in the frontal lobes are in the process of being rewired and parents can influence how new circuits form.”

Brain science has come a long way in the past decade. And parents and their children can benefit from the new and sophisticated understanding of brain physiology. American author Barbara Strauch, in her book The Primal Teen, says the volume of changes that take place in an adolescent’s brain rival that of a toddler. “At adolescence, a full-scale pruning of brain branches occurs. More than 50 per cent of neural connections are eliminated in certain areas.”

The pruning happens for a reason. The frontal lobes, which are the centre of impulse control, long-term planning and reasoning, are being pared down and rewired for adulthood. The parts of the brain that get used, that are active, become more effective; those that don’t get pruned.

While the rewiring is going on, there’s a detour. Decision-making is rerouted to the amygdala, an almond-shaped section associated with emotions. It’s this detour that’s responsible for the risk-taking behaviour associated with teens. Those risks, says Ms. Schafer, are a part of healthy brain development.

“Teens are astute at looking for risk and finding it; their brains are wired to do that. It’s not that they don’t assess things properly. They know more than they’re given credit for. Like a young bird who leaves the nest to fly, trying new things is their job at this stage.”

When it comes to money, it makes sense that teenagers have a hard time taking the long view. So the only way they can learn financial skills is by being given the opportunity to learn through real experience. It’s important, then, that parents resist the urge to control their kids’ financial lives. Risks, and the mistakes that come with them, are necessary – so long as parents hold their children accountable.

“A new buzz phrase in the counselling community is ‘failure is the new success,’ ” says Ms. Schafer. We know that teens who recover from failure are better poised to master their lives. They go further. But they can only recover if they're allowed to fail.

Back to 14-year-old Lukas. With his parents’ help, he’s learned all kinds of lessons about money. He knows that if he burns through his allowance by Thursday, he’s out of money for the weekend. Recently, after a couple of months of saving, he upgraded his own iPhone. He’s forging the right pathways – except in one arena, the hockey stick. Mr. Furlan, by his own admission, didn’t follow up on the payback deal he made with Lukas. A lost opportunity.

“It’s hard to do, but I tell parents they must not rescue their children,” says Ms. Schafer. “Not only does that negate the learning opportunity, but by sending a teen the message that ‘when I spend too much, my parents will cover me,’ you may end up with a 21-year-old who doesn’t have financial skills, who, at a deep level, believes other people are responsible for solving their financial problems.”

Apart from lending them money to buy an expensive item from time to time (money they pay back), there are many ways parents can help teach teens financial literacy.

Tips to help teens learn financial literacy

1) Allowance, an excellent learning tool, shouldn’t cost parents anything. Instead it should be a simple transfer of financial responsibilities from parent to child for things like transit, lunches and movies. When determining the amount, base it on concrete expenses a teen can understand.

2) Teenagers should get to know their bank. They should make deposits with any extra money, track their balance, use an ATM. To take it a step further, have them set up a forced savings plan where a small amount gets transferred automatically into an investment account. It’s a great way to teach teens how things work in the real world, only with smaller numbers.

3) Use their cellphones as a teaching tool. Make sure they know their monthly phone and data limits and that they track how much they’ve used. If they’re going over each month (and after they pay the extra cost), you can help them find a better plan.

4) Lend teens money when they want a special item. Let them prove they can pay it back with a small loan, $10 or $20. Once they succeed, you can try bigger amounts.

5) Teach them, within limits, what it costs to run a home: rent, mortgage, utilities. Keep it simple and show them one thing at a time, such as the monthly electricity bill. The idea is to teach them financial literacy without making them feel anxious or bored.

6) Show teens the relative costs of things. For example, compare the unit price of a box of brand-name cereal versus the no-name box; or compare the cost of a chicken dinner made at home to one ordered in, and one bought in a restaurant.

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