This Post: Money Management Tips for Teens: How to Save, Budget & Build Credit
Written By: The Raising Teens Today Community
Most teenagers I know are full-blown experts at spending money. Once they land a part-time job and get that first paycheck (and, of course, feel like they’re rich), off they go spending their hard-earned money on that new gaming console, that new pair of headphones, or those expensive leggings they’ve had their eye on for months.
I mean, who can blame them, though, right? I remember doing the same thing when I was their age! But after they ride the initial high of actually making money, they need to (at some point) learn the art of holding onto it.
After all, spending they’re good at, understanding how to spend responsibly, save, budget, build credit, invest, and create financial goals isn’t something most (not all, of course) teens haven’t quite mastered.
Here are a few money management tips for teens that can make all the difference in the world both now and when they venture off on their own.
Money Management Tips for Teens: How to Save, Budget & Build Credit
1. Open a Bank Account
Opening a savings and/or checking account will allow your teen to get a head start on managing their own money. Plus, it will give them a sense of independence, teach them how to withdraw funds at ATMs using a PIN number, how to make deposits, and allow them to check their balance. Make sure you introduce them to the concept of interest and explain how money in a savings account can grow over time.
*Many banks offer youth accounts with lower fees, which makes them ideal for teens learning how to manage their own finances.
2. Talk About Needs vs. Wants
It wasn’t until my kids became older, had part-time jobs, and started paying for things themselves that they realized how much everything costs.
My daughter quickly realized how much that trendy perfume she saw on TikTok cost and my son figured out that maybe he didn’t want to spend his hard-earned money on an expensive electric scooter.
It’s one of the most valuable lessons we can impart – teaching our kids to distinguish between what they need to spend their money on versus what they want to spend their money on. By grasping the distinction, we’ll be teaching them how to prioritize spending on necessities before indulging in impulsive, discretionary purchases.
Do not save what is left after spending, but spend what is left after saving. – Warren Buffett
3. Introduce Realistic Saving Habits
Whether from an allowance, birthday gift money, or a paycheck from a job, encourage your teen to set aside a specific percentage of their money/earnings – 10-20% is ideal, but even 5% is a great start. This habit not only teaches them financial discipline but also helps them understand the importance (and benefit) of having a financial cushion for future needs, wants, or emergencies. Also, be sure to help your teen understand their paycheck stub which can be confusing.
*Make sure you’re realistic about your teen’s saving habits. Of course, we want to encourage our kids to save and learn money management, but they are kids, and having a few bucks in your pocket to blow on something you want is exciting. They have their whole lives ahead of them to be “strict” with their spending.
4. Help Them Establish a Financial Goal
Maybe they want the latest and greatest cell phone or Airpods. Or, maybe they have a loftier goal like wanting to save for a car or college. Either way, a great way to get your teen to spend less and save more is by encouraging them to establish a financial goal. Saving for a specific future purchase requires patience, discipline, and a long-term mindset – key components of financial success.
5. Teach Them the Value of Hard Work
It’s a harsh lesson for teens to learn – nothing in life is handed to you on a silver platter… you have to work for what you want.
Even young teens can start earning money through chores, babysitting, pet sitting, doing yard work for neighbors, or a part-time job – all of which give them a keen understanding of the value of hard work and help them develop time management skills, responsibility, and a sense of accomplishment.
Sure, we’ll provide for our kids and splurge on things for them here and there. But the only way they’ll learn to appreciate the value of a dollar is by earning and saving their own money and budgeting how they want to spend it.
Hard work pays off if you’re patient enough to see it through.” – Michael Chandler
6. Set Up a Budget
Help your teen create a simple budget by listing their income, such as allowance or part-time job earnings, and their expenses, like little extras they choose to buy, entertainment with friends, and savings.
This will teach them how to prioritize their spending and differentiate between necessary expenses and optional ones.
7. Explain Credit and Debt
Nearly 1 in 5 American teenagers ages 13 to 17 now have a credit card, and the majority of them use their card at least once a week, according to research from TransUnion. While many parents might worry that their teen isn’t responsible enough to handle a credit card, with proper restrictions, precautions (a low credit limit), and discipline, a credit card can get your child’s credit score off to a great start.
Regardless of whether you offer your teen some financial freedom by getting them a credit card or you feel your teen isn’t quite ready to take on the responsibility, you can start teaching them about interest rates, how credit works, the importance of paying off balances in full, the consequences of accumulating debt, and how responsible borrowing and on-time payments contribute to a positive credit history.
READ: 5 Steps to Take Before Giving Your Teen a Credit Card
8. Introduce Online Banking and Financial Apps
Most teens are online and app wizards. They know all the latest and greatest apps and how to use them and they’re no stranger to navigating the online world. Therefore, teaching them about the ins and outs of online banking and financial apps shouldn’t be too big of a struggle.
Teach them how to check their account balances online, transfer money, and monitor transactions. Many apps are designed to help users track their spending, set savings goals, and even invest in small amounts. Also, many apps offer features like automatic savings or spending alerts, which can be especially helpful for teens who are just starting to manage their money.
READ: The Best Money Apps for Kids and Teens
9. Teach the Basics of Investing
According to Investopedia, “While it’s true that you generally need to be at least 18 years old to open your own brokerage account, minors have plenty of options to invest with supervision/collaboration with a parent/adult. And, getting a head start on investing comes with plenty of advantages.”
Once your teen learns key investing lingo and the basics of investing, they can start (with your help, of course) dabbling in the market. They might make money or they may lose some, but getting started early will help them learn financial literacy skills and risk management tips, and help them build a strong foundation for future financial success.
Check out TeenVestor.com – the site offers an array of free educational material (including information about stocks, funds, and the economy) for teen investors and their parents.
10. Lead by Example
Parents, remember… your kids are watching. If you’re a careless, indulgent spender, chances are they will be, too! Give your teen a glimpse into how you manage your own finances, whether it’s budgeting, saving, investing, or making purchasing decisions. Be open about the challenges and successes you’ve faced with money, and share the lessons you’ve learned along the way.
By practicing what you preach, you’ll not only be teaching them a critical life skill but also instilling in them a mindset of financial responsibility.
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