Teaching Teens About Personal Finance

Written by Karen Bryan

The only thing most teenagers know to do with money is spend, spend and spend until it’s all gone. This behavior won’t change without their parents’ help and guidance. As a parent, it’s your job to ensure that your teens become financially responsible adults. If you need some tips for this job, this article will help you make your rapidly growing teens into financially responsible young adults.

Get Your Teen Their Own Bank Account

Get your teenager a checking account that they can use for things like food, clothing, and entertainment. They should also have a savings account for longer-term goals like a vehicle. In some cases, you might need to get your child an account that will make you a joint account holder. However, let your teen have access to their money through the bank website and app.

Your teen should also have a debit card that’s linked to the checking account. This card will act as your child’s first exposure to responsible spending. Plus, the debit card keeps your teen from overspending since going over their limit will give them overdraft fees.

Put Your Teen In Charge Of Their Own Money

When your child first becomes a teenager, think about putting them in charge of their spending for things such as clothing and snacks. You can open an account for your teen and fund it a couple of times a year. But once you place the first deposit in the new account, let your teen know that they alone are responsible for making sure that the money lasts until you next replenish the account. You can then introduce your teen to different online tools such as Mint.com that will not only introduce your teen to the concept of budgeting but will also tell them when their spending gets off track.

Teach Your Teen The Importance of Budgeting

Financial expert Dave Ramsey has always stressed the importance of teaching responsible financial behavior for children of all ages. One tip he gives to parents is to sit their teenagers down and make a budget with them. But he also cautions parents against pushing their financial agenda on their teen. Ramsey believes that teens will not become amenable to putting themselves on a budget unless the budget contains categories that are important to them. For example, if your teen loves video games, let them include it as one of their spending categories. If your child loves to go to the movies with their friends, let them include movie money in their budget.

Teach Your Teen to Responsibly Use Credit Before College

A few tips from Investopedia that parents can follow to help their teen use credit responsibly include the following:

  • Make your teen an authorized user on one of your credit cards. But only do this if you pay off your balance in full every single month. If you don’t, you’ll harm your teen’s credit before they get started on adulthood.
  • If you think your teen can handle a credit card by themselves, tell them not to apply for multiple cards as this can make their credit score plummet.
  • Ensure that your teen pays whatever bills they have on time every single month. If they can’t handle this task, they shouldn’t get a credit card.
  • Discuss the Costs of College With Your Teen

Many college graduates have gotten overwhelmed dealing with student debt. Don’t let your teen get into this situation. You can help your child avoid this problem by talking to them about all the benefits and costs of the schools on their short list. Help your child look at any and all chances to finance their education through grants, scholarships, and work-study. Have your teen take a hard look at their career interests and talk to them about not taking on more debt than they can reasonably afford to pay back promptly.