Teaching Teens About Money: 4 Tips for Success
Your teen is growing older, and they’re transitioning into the “real world”, where money
management is a key skill to obtain. From credit card debt to overdue bill payments, there
are many financial holes that your teen could eventually find themselves in if they don’t
understand the art of money management. As your teen gets ready to enter the workforce,
you can help by teaching them the necessary skills to successfully manage their money.
These four, effective tips will help you give them a priceless learning experience that they
can carry through the rest of their moneymaking days.
1. Encourage them to save
When your teen earns money from work or a weekly allowance, they may be tempted to
blow it on clothes and weekend movies with their friends. These things are great once in a
while, but you should also encourage them to put a certain percentage in a savings account.
To make saving more appealing, help them set a savings goal. If they know the money’s
going toward a car, their college education, or even a vacation, they’ll be more excited to
save. Of course, you should also discuss the value of having an emergency fund. A savings
account can be a real lifesaver if you’re faced with unexpected expenses.
2. Allow them to pay for necessities
You can encourage your teen to become more independent by letting them pay for their
own bills (when appropriate). For example, if they insist on having an iPhone, let them pay
for the data plan. If they’re using the car for a night out with friends, let them pay for gas.
When your teen pays for practical things, they will see the financial requirements of
everyday life. What you let your teen pay for (and how much) will depend on your family’s
individual circumstances. Talk it over with your family and come up with a plan that’s fair
and reasonable for everyone.
3. Help them stick to a budget
Whether it’s their allowance or paycheck (or both), make sure your teen has a maximum
amount of money that they can spend each week. This will force them to prioritize their
purchases. At some, they’ll probably spend their money too fast, or buy something they
don’t really need, but that’s okay. It’s better for them to make these mistakes early, when
they’re under your roof. You can help them succeed at budgeting by discussing the
difference between wants versus needs, and the best uses for their money. Also, if they
want to buy something, encourage them to wait a week. If they really want it, they’ll still be
thinking about it then.
4. Help them track their expenses
Many teens and adults have an easier time budgeting when they track their purchases.
Your teen might be happy with a simple spreadsheet, which lets them sum up their
purchases for each month and see how much they’re spending. If your teen is tech savvy
(as most of them are!), they might prefer to use budgeting software or a budgeting app.
Some of our favorite apps include Easy Envelope Budget Aid, SplashMoney and
MoneyStrands. Have your teen try a few different ones and see what they like best.
This article was written by the experts at NerdWallet.com, a personal finance website
committed to helping you save money.