10 Tips for Teaching Money Management to Teens
We all pray that one day our children will become not only financially responsible, but also financially independent. Here are 10 steps for Teaching Money Management to Teens my husband and I used as our kids were growing up. I am pleased to report that the oldest 2 are gainfully employed adults who complete support themselves. Our youngest is in medical school, but is headed there soon.
10 Steps for Teaching Money Management to Teens
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Teaching Money Management to Teens: Where they learn the most
By the time they turn 13, teens have figured out where they rank in the socio-economic picture of the environment in which they live. They have figured out if they have more or less stuff or go on more or fewer vacations than their friends. They have watched you pay for things with cash, plastic cards, and apps. They may have been told “we can’t afford that” or maybe they have never those words. They have also probably listened to financial discussions between their parents.
No matter what you have told or will tell your children about money or what steps you take to teach them money management, the number one thing they will learn about money is how you handle it.
**Are you wondering what you should be teaching your teen about money? We have found this awesome resource! It’s called 5 Things Parents Must Teach Kids About Money. There is also Millionaire by 51. I have heard the guy speak who developed these 2 programs. He’s a bit dry, but his ideas are easy to implement, and so useful as we teach our teens!
Teaching Money Management to Teens: How they receive money
Before we get into the steps, let’s talk about how your teen will receive the money they manage. The big change from elementary school to the teen years in money management is there will be more and more times you will not be around when they need money.
Figure out the answers to these questions:
- Are you going to hand them money every time they walk out the door or are you going to give them an allowance and expect them to cover some of their expenses?
- Will they have to earn their allowance?
- What items should they pay for?
The following steps are meant to help you as you think through How to Teach Teens about Money while keeping your personal family situation in mind.
Teaching Money Management to Teens Tip 1: Allowance
Even if your children are not yet teens, open a savings account for them and give them some allowance. Giving children an allowance in their elementary years begins their education in saving, giving, and making purchasing decisions. It amazed me how many times I saw my children decide against an item after I told them, “Yes, you may have it, but you will have to pay for it.” We gave a fixed allowance to our children. If they wanted extra money, they could earn it by doing jobs like yard work. We let them determine their own rate of savings and giving.
Teaching Money Management to Teens Tip 2: Will they have a car?
Discuss with your teens and tweens if and how they are going to acquire a car. A car is most likely the first major purchase a teen will face. We required our kids to contribute to their car purchase. Knowing this years in advance gave them plenty of incentive to work for extra money and to save. My husband took them to used car lots and showed them cars online so they would know how much money they would need to purchase what they wanted. If they previously thought they would be happy with the car they could buy with mom and dad’s contribution, a trip to see actual cars showed them they needed to save for something more.
Another big decision point with a car is how much you and they will pay for gas, insurance, and maintenance of the car.
Teaching Money Management to Teens Tip 3: Discuss your money management style
Talk to your teens and younger children about how you manage your money. They don’t need to know every gritty detail of your finances, but discuss your overall financial values and strategies with them. If something might confuse them, make sure they understand why you are doing things a particular way.
For example: I almost always pay with credit cards. I do this because I want the airline miles, it is convenient, and it is safer than cash. (I know someone whose purse was stolen with her cash envelopes for the month inside.) However, I have told my children one million times that I ALWAYS pay the balance due IN FULL EVERY SINGLE MONTH. Whatever your financial situation and the story behind it, share it with your teens is an important aspect of how to teach your teens about money.
Teaching Money Management to Teens Tip 4: Prepaid debit cards
Prepaid Debit Cards are great for learning. I am not big on carrying lots of cash. As the kids transitioned to having more responsibility for expenses (in their tween years), we gave them prepaid debit cards. Each month, they told me how much of their allowance money to load on the card, how much they wanted in cash, and how much to put in savings. It was complicated with three children, but we made it through those years.
They were able to earn extra allowance by working in the yard and doing other jobs around the house. I had to insist they keep track of their own “extra money” hours, writing everything down on a log sheet I provided, and turning it all in to me once a month.
Times have changed a bit and you could also do this with Venmo or another app.
Teaching Money Management to Teens Tip 5: Transitioning them to a checking account
After they have a car or as needed, transition them to a checking account with a debit/ATM card. After they had the basics down, we put their allowance straight into their savings accounts. They were then responsible for transferring spending money into checking and going to the ATM if they needed cash.
Teaching Money Management to Teens Tip 6: What will they pay for?
Decide what expenses they should pay for with their allowance. This decision is personal and each family has to make their own decisions. Our kids have been responsible for gas, birthday gifts for their friends (this is a biggie as sometimes there are several birthday celebrations every month), meals out on their own, and entertainment.
We provide for their “needs” as determined by us. Our daughter sometimes bought extra clothes. Our sons would rather wear ratty shorts and a t-shirt on a 15 degree day than buy their own clothes. We also had a driving contract with our kids. If they followed their part of the contract, we paid for insurance and maintenance of their vehicles.
Teaching Money Management to Teens Tip 7: Jobs
Encourage them to get a job. We had enough yard work at our house to keep our kids busy and in money in their younger teen years, but later we liked for them to learn to work for someone else.
Our oldest (now almost 30!) was blessed with a very flexible job with four hour shifts, which enabled him to work even during the school year. Our middle son (now 27) transferred friend’s VHS recordings to more updated digital storage, filmed and edited events, worked as a camera man for his school’s football stadium “jumbotron,” and did other odd jobs.
Our youngest worked in the yard for several years. Her middle school and high school activities were pretty all-consuming so she was not able to work as much. These things are situational. She did work some and worked more hours in college than her brother’s did including waitressing just because she wanted to. It’s not as important how much they work or how much they make as it is just to get some experience doing it, seeing the paycheck, and managing the money they earn.
Teaching Money Management to Teens Tip 8: Choosing a College
What is the plan for college? Discuss with your teen as you begin the college search how much you will be able to contribute to their education. This number will not necessarily help you rule in and out schools at the outset because the “sticker price” at most schools is not the final price. But make sure that your student applies to at least one “safe” school that the family can afford if scholarships and financial aid do not work out.
Teaching Money Management to Teens Tip 9: Budget for College Living Expenses
Set a spending money budget for college. This can be a difficult allowance to determine. When our oldest went to college, we made our best guesstimate of what he would need for gas, groceries, personal items, meals out, and entertainment. At the end of the first semester, we re-evaluated and upped his allowance a bit.
We kept our kids a little poor and did not overdo the allowance so they would be incentivized to work. They all worked for the school doing various things – teaching labs, assisting with orientation, tutoring, and doing Door Dash, etc. Our youngest worked a lot of hours in at a local restaurant. She is in medical school now, so it did not hurt her grades.
Teaching Money Management to Teens Tip 10: Utilize financial literacy resources
There are many resources available that teach financial literacy and help with budgeting
- Start with your own bank’s app. We had access to all of their accounts and could transfer money in when we needed to.
- Homey is a free app that assigns chores to family members and keeps track of allowance or other rewards earned.
- Do your kids need a reality check? Go to Jumpstart and complete the reality check exercise. It will tell them how much money they need to earn for their desired spending.
- Check out our list of 17 Best Personal Finance Books for Young Adults.
The teen years can be a challenging time for many families financially. Teen activities are often expensive. Teens want freedom to go out to eat and buy entertainment. They want a car, fashionable clothing, and a smart phone. College is looming. Every family will have many decisions to make and there is no one right way to teach teens about money, but the end goal is the same: rearing financially responsible and independent children.
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How Will We Pay For College Next Year?
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