Is disposable income really the devil? Well, it depends on perspective. As an adult with grown up responsibilities such as paying for a mortgage and taking care of a family, disposable income is a wonderful thing which allows us to enjoy discretionary experiences and things. How, then, could disposable income ever be a bad thing you ask? Well, let me tell you! When a teenager or young adult first begins to earn their own money, unless it is offset by some personal responsibility, they have a plethora of disposable income. During this time of abundance, it is very easy to allow poor spending habits to take root. These habits, if allowed to continue, can make them feel persecuted and victimized when real life responsibilities hit and they can no longer have a daily treat from Starbucks, eat fast food, go to concerts and movies or buy video games frequently. Following are some ideas to help them learn to manage their income while learning incremental financial responsibility:
- Have them pay for items that benefit only themselves
- College savings
- Car expenses (gas, maintenance, insurance)
- Smart phones (including data plan and insurance)
- Personal items not required for basic care (ex. makeup, perfume)
- Personal entertainment outside of family events (movies, dining)
If I had a teen or young adult who was fully engaged in school and study time, I would expect far less in terms of financial participation than if I had one who spent lots of time in non-productive pursuits such as watching TV or playing video games.
Now is a good time to work on budgeting together. Obviously, it is a good thing if any working person has a surplus to spend on things that are enjoyable. However, having too much cash can give a minimum wage worker a false sense of prosperity if the income earned is not balanced by a corresponding measure of financial responsibility.
While they might not be particularly thankful now, your young adult will thank you later when they find that they have been groomed to be more capable than most and when they are prepared to strike out on their own much sooner than their peers. Then you can smile and take great satisfaction in knowing that you have done your job well!