Teenage money management isn’t always a fun topic to broach with your 13-going-on-30 year old who thinks they already know it all. But cultivating positive habits and good personal finance for teens is a quality they’ll use and appreciate their entire lives—and a skill you’ll be grateful for, too, once your young adult establishes their own financial independence.
Talking about money doesn’t need to be like pulling teeth. Here’s some advice for easy and painless money management training for young adults that your family should start working on today!
Personal Finance for Teens
Only four states (Virginia, Tennessee, Missouri, and Utah) require high school students to complete a stand-alone course in personal finances to graduate high school, but every teen should enter adulthood with basic financial literacy.
Sadly, few teens understand basic financial terms (such as “interest rate”, “debit card”, and “financial institution”), or are saving for long term goals, like college or buying a home. And less than one-third of teens know how credit card interest works, according to a survey reported in Huffington Post.
A 2009 study by the National Bureau of Economic Research (NBER) found that only 27% of young adults understood basic financial concepts like inflation and interest rate calculations. Basic personal finance for teens is critical in order to thrive independently as adults, and these money management skills should be taught when kids are young, so positive habits have time to develop before they leave the nest.
Teenage Money Management Lessons
Here are some of the most important personal finance basics for high school students.
Financial Tips for Teens: Make Saving Second Nature
Ideally, children should learn to set aside some of their money as savings from the time they start receiving an allowance in the elementary school years. Teens should be encouraged to save money consistently from all the cash or income, including money from part-time jobs, allowances, and special occasion money like that for birthdays and Bar Mitzvahs.
Teens should learn to skim this money right off the top and put it into a savings account. This ingrains a saving habit early on, so make it one of your first lessons in finance for teens.
Financial Tips for Teens: Learn the Value of Budgeting and Delayed Gratification
High school students and delayed gratification may seem to go together like oil and water, yet young people are perfectly capable of learning basic budgeting. Creating a budget isn't just for adults with mortgages and bills, but for anyone who wants to learn to manage and spend money better.
Fortunately there are some terrific online tools, like our budget app and budget tracker, that make setting up and monitoring a budget flexible and simple. Your teen can carry around his or her bank balances and savings goals right on their phone, and can even set up automatic alerts for situations like a bank balance dropping below a certain threshold.
Start now: Sign up for Mint and check out our free, easy personal finance tools that can work for you and your teen.
Personal Finance Lessons for Teens: How Bank Accounts Work
Teens may think of bank accounts as little more than remote piggy banks that occasionally chip in a little interest money. Teach them that a teenage savings account is the key to being able to afford bigger ticket items later and cope with financial emergencies like replacing a pair of basketball shoes left behind after an away game. A bank account can also be a route to a secured credit card once a large enough balance can be maintained.
Personal Finance Lessons for Teens: How Credit Cards Work
Even if a teen doesn't obtain a credit card until after college, knowing how they work can help keep temptation in check once that day arrives. Teenage money management includes their awareness about how much credit cards charge in interest and how interest can make the true price of an item go up drastically.
The basics of credit card rewards programs (and how they are only beneficial to those who don't carry a balance) are other personal finance basics for teens that they should learn before they sign up for their first credit card.
Personal Finance Lessons for Teens: The Importance of Credit Scores
Teens are used to being graded. From report cards to SATs, teens are well aware of how numbers are used to represent accomplishments and responsibility. The concept of the credit score is not lost on the average teen, and though most can't do much about their credit score during high school, they can lay the foundation for building one in adulthood with teenage money management.
By learning the concepts listed above (saving habits, bank accounts, credit card interest) and putting them into practice, your child will be much better prepared when they begin building their own credit history.
Without proper teenage money management, those with low financial literacy are more likely to have problems with debt, are less likely to invest, and are less likely to plan for retirement. High schoolers are hungry to understand personal finance basics for teens, with 84% of college students saying they needed more education on financial management. Sixty-four percent of college students say they would like to have received this information while still in high school, according to the NBER study.
If you're the parent of a teenager, your child probably isn't receiving personal finance instruction for young adults at their school. Whether or not he or she is formally learning about teenage money management, it's important that you emphasize the value of developing good personal finance habits at a young age and do your best to set a good example.
Personal Finance for Teens: FAQ
Okay Mom and Dad, if you have a few more questions about how you can pass on the importance of personal finance basics to your high school students at home, here is our best advice for our most commonly asked questions.
How do you manage pocket money?
If you’ve come across way too many $20 bills while doing your kid’s laundry, your frustration over poorly managed pocket money is probably pretty strong. To teach better teenage money management skills, make them earn their pocket money rather than forking it over every Friday night. If a weekly allowance doesn’t work for your family, consider making a price list for jobs around the house so they can create their own income.
How can a teenager stop spending money?
For starters, you can stop giving it to them – but that doesn’t foster finance skills for teens, it simply punishes them. Alternatively, try to encourage their saving habit with some juicy incentives. For example, you might consider matching a portion of their monthly contributions to their teenage savings account. Another great financial tip for teens is to suggest they carry cash rather than a debit card; seeing the cold, hard bills drain from their wallet will motivate them to hang onto them a little longer!
Why is teenage money important?
Not because your daughter wants a designer purse or your son needs the latest Nikes. It’s important to teach personal finance to teens in order to pave the way for responsible spending in college, financial planning for the future, and family budgeting when it comes time to start thinking about your little grandchildren down the road.
How do I teach my teenager to manage money?
A great place to start is by signing up for the online personal finance tools at Mint and showing your teen how they work.
Try it now: Sign up for Mint and start using our easy personal finance tools that can help you and your teen.