Money Management For Teens
13 Things All Financially Savvy Teens Should Know For Financially Literacy
If you have a teen like I do (I have two!) then you know that they can sometimes be frivolous with money.
They don’t always understand the true value of it unless they have been specifically taught to respect its importance in life and in your home.
This post is all about helping your teen enjoy a bright future by teaching them financial responsibility.
I cannot stress how important this is.
Knowing the basics of money management will help your child to plan ahead and achieve their life goals.
It is not always something that is specifically taught in school (though it should be – if you have a school that teaches money management, then you are one of the lucky ones!)
Think about how your teen views money right now.
How much have they learned from you? Where do their opinions and beliefs come from?
If you feel a little awkward talking about money, the following steps will make it easier for you.
Now is really the time for you to broach a conversation with them about budgeting, shopping, saving, and using credit wisely in the future.
BUDGET WISELY
MONEY MANAGEMENT FOR TEENS 101
# 1 – Learn the basics of budgeting.
Obviously it helps if YOU have a good idea how to budget your money because then you can explain to them exactly how you have used a budget successfully in the past.
If not, have no fear!
Research the topic of budgeting in advance and explain to your teen budgeting in simple terms as a plan for income and expenses.
Discuss examples of trade-offs and the concept of needing to earn more or spend less in order to remain financially secure.
This is Money Management 101 – you cannot spend more than you earn to stay afloat.
MONEY MANAGEMENT FOR TEENS 101
# 2 – Get familiar with ordinary household expenses.
Does your teen have any idea how much electricity or gas costs?
Do they have an idea how all these expenses add up?
Give your teen an early start on knowing the cost of typical goods and services.
Let them physically see the cable TV bill and your monthly car or mortgage payment.
Bills are a reality of life and there is little point in hiding this information from them.
MONEY MANAGEMENT FOR TEENS 101
# 3 – Monitor your spending
Ask your teen to keep track of their spending for a month or more.
This is a pretty simple task right?
Your kids may be surprised by how much they really spend on eating out or clothing. Those numbers can really add up if you don’t keep your eyes on it!
MONEY MANAGEMENT FOR TEENS 101
# 4 – Manage your income
As long as school remains the top priority, encourage your teen to have some income of their own to manage.
I started working from the age of 14, a few hours after school on Wednesdays and all day Saturdays.
It was just a thing my dad made sure that my sisters and I all did consistently from a young age.
You can provide an allowance or support their efforts to find a summer job if you wish.
Once they find a part-time job, help set up a bank account for your teen and encourage them to save at least half of their income.
It actually feels so good to watch your own money grow as a teen!
MONEY MANAGEMENT FOR TEENS 101
5 – Shop together
It’s super easy to want to throw EVERYTHING into the trolley when you don’t have a budget or actually have to fork over your wallet at the end of the shopping trip.
I know from experience how much their requests add up when your teens constantly want exotic fruits like mangoes and raspberries (which cost a bomb here in Oz when it’s off season).
Go shopping together with your teen to demonstrate how to get the best value.
Compare prices for generic and brand name products at the grocery store.
Look for special sales at the local mall.
Teach them the smart way to shop – not just in theory but in practice.
This is how they will learn to be a smart shopper – from seeing how you do it well.
MONEY MANAGEMENT FOR TEENS 101
# 6- Research major purchases
If you are looking to buy something big, I recommend assigning your teen the task of doing research for this major purchase.
One example is for a cell phone (they all love their cell phones).
Let them compare plans and help decide what features they really need.
What is the long term cost of this product if they are looking to go on a plan and how does it compare to buying it outright?
If they do a little research first it can lead to massive savings in the long run.
MONEY MANAGEMENT FOR TEENS 101
7- Analyze materialism
Here’s a sad truth about life: we now live in a materialistic society where advertising constantly bombards us with messages to consume more.
Discuss the importance of moderation with your teen and how important it is to base your happiness on sources other than your possessions.
One day they will learn from experience that material things mean nothing and all that matters is the well-being of the people in their life.
You can own everything in the world but if you lack contentment you will never be happy.
Material things can be replaced but the important people in your life can’t be.
If money and material things are our sole focus and center in life, they will seize us and make us slaves.
MONEY MANAGEMENT FOR TEENS 101
# 8 – Establish goals
I love setting goals; my kids not so much yet (but there is still time for me to drum in the importance of goal-setting – I’m hoping one day it will stick!).
Help your teen to set short and long term goals that will motivate them to build up some savings.
It can be a simple amount to begin with like $100 or $500 (depending on whether they have a job or not).
One day they will be looking at big purchases like a car and it’s important that they learn the importance of delayed gratification now.
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MONEY MANAGEMENT FOR TEENS 101
# 9 – Understand interest
Provide your teen with an introduction to the power of interest.
Your child may want to save more if they realize how much money they can earn by starting a savings account when they’re young.
MONEY MANAGEMENT FOR TEENS 101
10 – Develop a savings strategy
Help your teen find a plan that works for them.
They may want to set aside a small percentage of their allowance or half the money they get for their birthday or from a part time job.
I love the idea of half because it’s an easy rule to follow and they still have some room to play.
If possible, you can provide an extra incentive by offering to match whatever amount they save.
MONEY MANAGEMENT FOR TEENS 101
# 11 – Select the right instrument for you
I have to say that I DON’T agree with teens having access to credit cards (even adults are prone to abusing credit cards so it isn’t fair to put this temptation into your teen’s hands).
However I don’t mind the idea of debit cards which give you the peace of mind of enforcing a pre-established spending limit (your teen can only spend the money which you have deposited in there.).
Most cards give you the option to review all statements and it may be useful to have a debit card on hand in case of a (real not imagined) emergency.
MONEY MANAGEMENT FOR TEENS 101
# 12 – Pay your balance off monthly
Even if your teen doesn’t have a credit card you should still explain to them how interest works and how it works against them when borrowing.
Show them how paying off a credit card balance each month protects you from paying much more than the original price for the goods and services you charged.
For the record, after almost 20 years of having a credit card, I have paid even one cent in interest because I have always paid the balance off in full at the end of the month.
It was the rule my father taught me to follow (he hates credit cards but taught me if you REALLY need to have one whatever you do PAY IT OFF IN FULL EVERY MONTH).
MONEY MANAGEMENT FOR TEENS 101
13 – Know the significance of good credit
Talk with your teens about the importance of good credit.
Explain how being responsible about paying off bills helps people to qualify for financing when they need student loans or want to buy a house.
This is a reason why I did get a credit card in my twenties (much to my parents dismay).
But as I said it before my credit rating is perfect when it comes to making payments on bills.
So there you go – these are 13 important conversations you can start with your teen today to help them master the basics of money management.
By encouraging them to be responsible from an early age, you will instill good money habits in your teen that will help them in the future.
That is the one of most important life skills we can impart to our teens – to help them learn to manage their money well.
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