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A Concise Guide of Money Management for Teenagers


Disclosure: This post may include affiliate links. As an affiliate, I earn from qualifying purchases.

This is a sponsored post written by me on behalf of Navy Federal Credit Union. All opinions are 100% mine. Navy Federal is federally insured by NCUA.

Money management for teenagers is an important, and often overlooked parenting responsibility. Money is often a taboo subject, so we limit the discussion to a single chat or a few random mentions. Instead, we can help our kids develop a strong financial foundation by guiding them carefully through the topic of personal finance.

The teen years are the perfect time for teaching financial management. At this age, kids finally have some real earning opportunities and they’re eager to become more independent.

When teaching your teenager about money management, there are several important areas to cover. I’ve broken them down in the order I followed with my own kids – beginning with basic concepts to more complex financial topics.

Income

Before teens can learn how to manage money, they need to actually have some to manage! One of the best things you can do for your teen is encourage them to get their first job.

Whether it’s babysitting, lawn maintenance, or working at a store or restaurant, working to earn their own paycheck is critical to understanding the value of money. Also, part-time jobs are great for teaching responsibility, humility, and independence.

Who knows? Your teen might be a budding entrepreneur and the push to earn income is all they need to unleash that potential!

If a part-time job isn’t feasible for some reason, at least establish an allowance system as compensation for certain chores.

Paying Bills

Once teens are making money, they need to understand the other side of the money equation — paying others. And yet, this is an area many parents neglect until teens leave home.

As parents, most of us think it’s our responsibility to cover all of our children’s expenses, especially while they’re still minors. But teaching them to pay bills while we’re on-hand to help them is one of the best things we can do to teach them financial responsibility.

You don’t need to start charging your teen rent or make them chip in for groceries. They should, however, bear part of the expense of a car (if they’re driving). Consider having your teen take on some of these other recurring expenses: cell phone service, entertainment subscriptions (e.g. video games or premium channels), or gym memberships.

Budgeting

Once income and bills are established, we’re ready to tackle the most important teenage money management lesson: how to budget. Budgeting is one of the best financial habits to establish early on since it forces us to regularly evaluate the state of our finances.

The great thing about introducing budgeting to high school students is that it’s so easy at that age! Their income and expenses are uncomplicated. So, it’s not only easy to create the budget, but also to stick to it.

Bank Accounts

A big step towards financial independence is establishing bank accounts. If they haven’t already, it’s time to move beyond a piggy bank.

Talk to your teen about different types of savings accounts (e.g. regular savings, money market accounts, and certificates of deposit) and how the interest rate, terms, and flexibility differ between the options.

I also recommend establishing a checking account, even though the thought of overdrafts might frighten you. What better time to learn how to properly manage money though when the stakes are so low?

Your teen’s expenses will likely never be lower and you can closely watch for (and quickly help remedy) any problems while your teen still lives at home. Better for your child to learn about monitoring their balance when the penalty is one small fee, than a whole avalanche of fees that compound, which can happen when they’re older and have many more bills to pay.

When considering what type of accounts to set up and where to establish them, look out for special offers specifically for minors.

For example, during Youth Week (April 11-18) this year, Navy Federal Credit Union is offering:

  • $25 bonus to new members under 18 years of age who open their membership online.
  • $10 bonus to members ages 17 and under who open a new EasyStartSM or Special EasyStart Certificate (share only).
  • $25 bonus for young adults ages 14-24 who open a Free Campus Checking account and choose digital combined statement delivery.

Smart Shopping

Depending on how you do your family shopping, your teen may already have learned some smart shopping habits from you. Don’t assume it though.

Talk to your child about how to determine a good value, the importance of comparison shopping, and understanding that high quality and brand name are sometimes related but not always. And encourage them to try exercising a 24-hour wait rule to avoid impulse purchases.

Also share your tips for finding good deals and where to find discount codes, coupons, etc before they make purchases. If your teen learns these shopping habits early, they’ll save themselves thousands of dollars in adulthood!

Saving Plan

When helping your teen develop financial literacy, make sure to discuss the magic of compound interest. With all of my kids, I try to stress how much saving early can provide them with financial security later in life.

Talk to your teen about creating an emergency fund. If they start it now, when they don’t really need one, it’ll be easy to add to it when they really need it to fall back on.

A great way to teach good saving habits is to have your teen pick something high value they want to purchase and then create a savings plan to pay cash for it in 3-6 months.

Investing

After your teen has successfully saved a decent sum, introduce them to investing. I recommend a low-risk mutual fund.

Again, the goal here is to introduce them to as many financial areas as possible while they still have the safety net of your proximity and involvement.

Using Credit

I know. Picturing your teen with credit cards is a little scary. I have good news though, there are some options out there that will help you teach your child responsible credit card use without putting your teen (or you) at substantial risk of racking up debt.

For example, Navy Federal gives parents the option to add authorized users to their credit card account and set spending limits for each cardholder. This is the perfect way to help your child establish credit safely.

If you’re not ready to jump directly into giving your child a credit card, consider a debit card instead. The GO Prepaid card gives you the ability to limit spending by loading only a set amount onto the card.

Student Loans

As your teen nears high school graduation, talk to them about student loans. It’s important for kids to understand the cost of higher education and take part in the process of financing it.

Even if you’ve saved enough to cover college expenses, I think reviewing student loan rates and terms is a great way to talk about the smart use of debt when it relates to future goals.

If you manage to cover all of the areas above with your teen before they leave home, you’ll have provided them with a solid foundation for a lifetime of financial security. What better gift could we provide for our kids?

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