<p>Marite,
Because of the potential hit on financial aid, I think it makes sense for the high school student to spend rather than save, but not to spend frivolously. As an example, my son did a summer community-service oriented foreign exchange in high school, largely funded from his own savings. I think that experience was a worthwhile growth experience for him, and also enhanced his admission chances at some colleges - so it was better in his case to spend the money than to sit on it. </p>
<p>However, its also important to note that student income also impacts financial aid – so it doesn’t make much sense for a student with a significant income to waste assets – the money earned in the year immediately preceding the college application year is going to be factored into financial aid whether or not it has beens spent. </p>
<p>But my reasoning was simply that as a family, all the money was in the same “pot”. If I financed my son’s overseas travel in high school, then I would get dinged on that money when it came to the aid process – our EFC would be higher, so I would have to pay more for college. If I told my son that he had to pay for the travel from his own savings – then I would still be paying for his college, but potentially I would pay somewhat less. My son, of course would have less money in the bank, but jointly we would be in a stronger financial position.</p>
<p>I would not have dreamed of asking my son to pay for things that I considered to be my parental responsibility – such as the cost of his own medical or dental expenses – nor would I have encouraged him to spend down income for frivolous acquisitions. But it makes sense to have the kid spend the money on expenses related to EC’s or educational endeavors, or purchases of equipment like a laptop computer.</p>
<p>I employ 5-7 teenagers at any one time. They all make about $100 week – more during the holidays and vacations. </p>
<p>We are in a high income demographic – all these kids are going on to college. They are all saving the money. I don’t think they need it for tuition, but they all seem to want it for incidentals at college. As a group, I don’t see the money being blown on frivolity. </p>
<p>It’s also really need to see them come back after a semester at college. NOW they know what their hard work will buy them! They all want hours after being away at school.</p>
<p>Beginning at age five our kids got an allowance of $1=age, ending at graduation from high school. Of that 50% went into savings for them, so at age $10, they received $5 and another $5 went into the bank. Both were encouraged to get jobs when old enough to have a work permit (which around here is age 14). They were encouraged to put 50% of their work money into savings, although it usually ended up being closer to 100% since they were OK living on their allowance for spending money. These savings, however, were not designated just for college. If they had something they wanted or needed to spend money on, they could take money out of savings to do so whether it be a new video game or paying for prom. So savings were for big expenses that required some thought, as opposed to fast food and gas expenses. </p>
<p>Now that they are in college, they don’t get an allowance and can earn/save/spend their money however they want. We have the things we pay for and everything else is their expense. If they were to run out of their savings, they would need to work more hours or take out a student loan, but both have pretty hefty bank accounts at this point and are good with money so loans are unlikely to happen. </p>
<p>As an aside, we put an amount equal to their annual earnings (which is the max allowed under the tax code) directly into a retirement account for each. They cannot use that money but do have input into how it is invested and can see the impact of compounding. We expect them to begin funding their own retirement upon graduation from college. No matter how little their salary, they know the trick of just pretending the net after savings, which always comes first, is what is available to spend and their living expenses must be adjusted accordingly.</p>