Money Smart Teens

How can I help my teen?

You can help your teen become money-smart by:

• encouraging them to save for things they want in their own bank account
• using everyday activities like opening bank statements or bills, or going to a money machine to talk about the value of money
• explaining interest ? your teen needs to know that you can earn interest by saving, and that you pay interest when you borrow money or buy on hire purchase
• being aware of money personalities ? is your teen more inclined to spend or save?
• being consistent ? if you?ve made a rule or an agreement about money, be decisive and stick to it
• getting your teen into the habit of budgeting by encouraging them to keep a record of what they earn or get for pocket money and what they spend.

Helping your teenager get money-smart during their secondary years will set them up for life.

Rules of a sorted student

Share these rules with your teenager to help them become money-smart.

• Borrow only what you need. The more you borrow, the more you have to pay back.
• Explore other sources of money. Is there some other form of income out there that will help you reduce the amount you borrow?
• Know the true cost of your loan. It?s not just the sum you borrow, it?s the time it takes to pay off and any interest you may be charged.
• Know the value of your qualification. Putting a dollar value on your earning potential will help you work out if borrowing for your qualification is money well spent.
• Understand your repayment options. Pay back just the minimum or get rid of your loan sooner? It?s up to you.
• Know your obligations. Be aware that student loans won?t go away and you can?t get out of them.
• Do a budget. Knowing exactly where your money is going is the first step toward controlling your spending.
• Avoid high-interest debt. Credit cards and personal loans can be very expensive.

Get them to have a go

Get your teen to test their ?money smarts? on these tasks.

Buying some wheels

Let?s say you want to buy a car. A good general rule is not to borrow money for things that lose value over time, like cars.

• Using the Saturday paper or the Internet, cut or print out adverts for cars you would like to buy.
• Then, work out how much it would cost if you borrow the money, and how much you would lose if you sell it in one year, three years and five years based on what the adverts show about older cars.
• Then work out the cost of running the vehicle:
  • registration
  • petrol
  • repairs (including tyres)
  • warrant of fitness
  • insurance
  • parking
  • other costs (like parking fines)
• Use the calculators on the Sorted website to help.  

Money personality

Work out your money personality on the Sorted website.  The whole family
can do this. While there, have a good look around this website ? it has some
great stuff.

Tax stuff

If your teen has a part-time job ? even if it?s babysitting, lawn mowing or at a supermarket checkout ? they?ll need an Inland Revenue (IRD) number. They may already have one if they have a bank account in their name. If not, they just need to follow the steps below.  They will need to give their IRD number to their employer and bank so that the right amount of tax is taken off their pay and any interest earned.

Applying for an IRD number

It is as simple as 1, 2, 3.

1. Fill in an IR595 application form ? download from the Inland Revenue website or phone 0800 227 774.
2. Send the application form with ID such as a copy of your birth certificate, driver?s licence or passport to your closest Inland Revenue regional office. The regional office address will be at the bottom of the form.
3. They will send you your IRD number within 8?10 working days of receiving the application form.

How much tax?

Depending on how much your teen earns, they may not have to pay any PAYE (pay as you earn) tax. However, if they do, the tax range is 15 to 39 cents per dollar. To work out how much tax they will have to pay, use the PAYE calculator on the Inland Revenue website or phone Inland Revenue on 0800 377 774.