10 ways to teach teens about money

  • Purposeful lessons and well-thought-out role models will provide your teen with lifelong financial skills.
  • Parents should strive to teach their teens the basics of earning, saving, budgeting and managing credit.
  • You should also help your teen to differentiate between wants and needs, and enrich their financial skills through educational apps and websites.

Managing money does not come intuitively. It is learned by watching others do it and from personal experience. How parents talk about money and the choices they make with them sends powerful messages to teens.

However, it is not enough to see parents make good decisions. Teenagers want responsibility and they want to be involved. By introducing purposeful discussions and expectations about money, your teen will grow up with the experience and knowledge they need to protect their finances and avoid costly mistakes.

10 ways to teach teens to be financially responsible adults

Whether your teen is managing money from a job or budgeting for a grant, developing good habits will help them make good decisions once they are on their own. Here are ten practical ways you can help them get started:

Make money

Before your teen can handle money, they need to make money. It can start at home or with a first job. Consider paying your teen to do extra housework. Encourage them to do gardening or take care of neighbors’ pets. If they are old enough, guide them to a part-time job. There is a wide range of jobs available for teenagers, from internships to camp counselors, babysitters and restaurant workers.

Once they have earned, let your teen divide their money into dedicated amounts to save, give and spend. The Consumer Financial Protection Bureau (CFPB) recommends that you save at least 10% of each paycheck and teach teens about payroll deductions. Another option is 70-20-10 budgeting. According to this strategy, 70% goes to needs and wishes, 20% to savings and 10% to donations.

2. Charity

Having money available to share, and being intentional and consistent with it, is rewarding for your teen and good for your community. Setting aside funds to give, especially when your budget is tight, requires commitment and discipline. Donations do not have to be large sums or given to large organizations.

A few dollars dropped in a collection box, to support youth sports teams, refugees, the environment or an animal shelter is a good start. Motivate your teen by encouraging them to give to organizations or things they are passionate about.

3. Bank accounts

Having a bank account gives teenagers the opportunity to manage their money independently while still receiving guidance from their parents. This provides benefits for both parents and children, explains Matt Gromada, head of youth, family and novice banking at Chase.

“First, it opens the door to important conversations and real-world scenarios about the basics of finance – from spending and saving to explaining interest rates and how they arise,” says Gromada. “Second, it gives the child a sense of independence and freedom, which provides opportunities for real-life experiences and learning.”

If your child earns a paycheck, direct deposit is a convenient option. The financial institution should be federally insured and offer online and mobile access, giving your teen the opportunity to check balances from their phone.

4. Bank cards or prepaid cards

With money in the bank, your teen will need a way to access them. Bank cards withdraw their account balance as they are spent and can be accepted instead of a credit card at the point of sale. They can be convenient but can come with fees and hefty penalties if the account is overdrawn.

Prepaid cards offer more guarantees but less learning in reality. The parent determines the available amount and pre-installs it on the card. Purchases in excess of the available balance are not approved, but linked parent and teen apps allow parents to transfer money immediately when needed. They can be a reasonable solution for those who are not yet ready for a traditional debit card.

When choosing between a debit card or a prepaid card, consider your child’s financial knowledge and maturity, along with your needs and desires as their parent.

5. Save

Learning how to save money helps your teen prepare for anything from special purchases, to college, retirement, and emergencies. Develop a budget with them and show them the value of being frugal. Prioritize needs over wishes.

The CFPB encourages teens to “save 10% of what you earn and have at least three months of living expenses saved in the event of an emergency.”

Make a budget and discuss with your teen how much they can save. Ask them to think about what they have to give up to reach their savings goals and why it is worth it.

Modeling restraint with purchases also shows that teenagers have control over their money and choices. Thus, Varda Meyers Epstein, parenting expert and writer at Kars4Kids, advises not to tell a teenager that you “can not afford” to buy something you really want, such as a new cell phone or other expensive items.

“The phrase suggests passivity and lack of control over one’s finances,” says Epstein. “It makes more sense to say, ‘I prefer not to buy that phone because I’d rather put that money in your college fund’ or ‘I do not want to spend money on a phone right now’ or, ‘If you can find it for a better price, I can consider it. “The point is to show that you have control and that you have choices and a way to use what you have wisely.”

6. Pay for college

Paying for college can be one of your teen’s most important financial goals. Having real conversations with them about the costs, how much you will be able to contribute as a family and how much they will be responsible for on their own will help them understand the financial burden. They will benefit from saving early, making a plan and applying for grants and scholarships. The less debt they get out of school with, the better.

The College Cost Calculator from the College Savings Plan Network, which advocates tax-free government savings plans called 529s, can help you understand what to expect.

“As long as you do it long enough, you’ll see really good returns,” says Jordan Lee, founder of Backer, an investment platform that makes it easy for friends and family to contribute to a child’s college account. “You never have to pay

capital gains tax

when you actually use the money, or on the growth of the fund over time. ”

Lee also notes that it’s not too late to start a 529 even when a student is in his teens. “Having four to seven years to build and invest a college account with the help of family and friends should grow enough money for a student to cover a semester or years of tuition, or board and lodging, depending on which school they choose,” he says.

7. Understand compound interest

Compound interest can be a financial booster or an asset-destroying enemy. Teach your teen how it works, with concrete examples, so they understand its power.

Interest on interest

is an excellent financial ally when it comes to investing.

“If an 18-year-old only invests $ 37 a month and gets an annual return of 12%, they will have over a million dollars by age 65!” says Matthew Robbs, founder of the Smart Saving Advice website. “If they wait ten years until they are 28 and invest the same $ 37 with the same return, they will only have $ 300,000 at age 65.”

But collecting credit cards and other high-interest debt can have the same principle to counteract them.

“Teaching young people this is important

money management

In fact, it will allow them to save and invest for the future rather than waste years repaying credit card debts for stupid decisions they made, Robb says.

Want to see how fast your money will grow? Sit down with your teenager and experiment with different grant amounts and interest rates using the Personal Finance Insider’s compound interest calculator.

$10 685
Your balance after 5 years

Initial investment


Total contribution

$2 500

8. Credit card

Teenagers need to understand how credit cards work, even if they do not get one until college or later.

“To be aware and practice

good credit

card habits such as spending within your resources and paying your balance on time and in full can help pave the way for big purchases and moments of life as credit affects future housing arrangements, the ability to buy a car and even employment opportunities, says Mary Hines Droesch, Head of Consumer and Small Business Products at Bank of America.

Securing credit cards and adding your teen as an authorized user to your account can be ways to help them build credit with lower risk.

9. Credit points

Prepare your teen for top-notch credit scores by teaching them how a credit score is calculated and why it’s important.

Generally, paying bills on time and in full and avoiding large loans will give you more options and lower interest rates when applying for loans or credit cards. Credit points can also have an impact on the prices you are offered for insurance and also certain job opportunities.

Talk to your teen about credit limits and credit usage, and make sure they understand that buying on credit means using borrowed money.

10. Apps for managing and saving money

Modern teenagers grow up in a digital world that is very different from their parents and grandparents. Why not meet them there? Online tools and apps can make it easy and fun to learn about economics. For example, the Acorns and Wealthsimple platforms promote savings and investment in backup exchanges. Simplifi by Quicken lets you set goals, track expenses and create budgets – a time-saving, one-stop app that the company says helps you take control of your finances.

“Teenagers use their phones a lot,” says Julien Brault, CEO of the financial management app Hardbacon. “Why advise against it? Instead, apps and tools available on their cell phones will help them become better equipped to manage their own finances.”

Financial institutions also have tools to help your teen get the most out of their money. For example, Chase autosave lets you set and fund savings goals either when deposits are made or according to your chosen schedule. Greenlight, which offers prepaid debit cards to families and comes with robust support, has dedicated content to enhance your child’s financial skills.

Help your teen build a solid financial future

You do not have to be a money expert to help your teen on their financial journey. Help is available through educational content from the Jump $ tart Coalition and the Federal Deposit Insurance Corporation’s Money Smart curriculum, which offers games and online lessons targeted at specific age groups, including teens.

Talk openly with your children about finances and be an example for them to follow. Include them in your budget. Ask them to help pay for things they want. Follow sound principles. Through Mymoney.gov, the Congressional Chartered Financial Literacy and Education Commission offers advice on earning, saving, protecting, spending and borrowing money. Show in your daily decisions that you control where your money goes and what you spend it on.

“As in any other area of ​​life, children will adopt financial habits from their parents,” said Tanya Peterson, vice president of the brand at Freedom Financial Network. “If parents are arguing about money, or spending it out of style, that’s what the kids will take for granted. On the other hand, if teens hear parents discuss, or act on, how they can live within their resources (even simple ones). things like refilling water bottles versus buying individual drinks or cooking more meals at home), that’s what they’ll learn. “

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