5 Steps to Raising a Money-Savvy Teen
Make sure your teen grows up to be a money smart adult by taking advantage of these teachable money moments.
The teen years provide many changes in the life of a teenager.
Here are a few of the tips that parents should consider to take advantage of this teachable money moment. It’s what we’re appropriately calling the “MONEY” plan for teenagers:
Motivate your teen to want to save by starting a matching program.
The goal is to help your teen create a habit of saving 10% of his or her income, so parents could create a program that matches the first 5% with $.50 on the dollar and matches the next 5% saved dollar for dollar.
It’s now time to graduate from piggybanks to the real thing.
Put those savings in a savings account in your teen’s name. Some banks offer accounts specifically for teenagers that can be opened for as little as a $1 without any fees or consider opening a Roth IRA for your teen to expose them to investing basics and the power of compounding interest.
Start Teaching Your Children the Importance of Saving
Compare savings and money market account rates and open an account for them today.
When that first paycheck comes in, teenagers will likely want to splurge.
Encourage your teen to write down what they purchase with their hard-earned money, so you can sit down and review their spending habits. With that information, you can help your teen create their first budget, which you can compare to your household budget to open their eyes as to how mortgage, utilities and other routine expenses really add up.
This may be the first time your teen has the opportunity to help someone less fortunate by donating his/her own money. It’s a positive financial lesson to instill early.
In addition to helping a worthy cause, you can explain that your teen can be rewarded for their good deed with a tax break from the government.
Yield to Change
After creating that initial budget, your digital teen likely will get bored with the “pen to paper” way of managing money, so embrace the multitude of online tools available today to help keep your teen’s attention. Money apps and websites can help show, with easy-to-understand charts and graphs, where their money is going and even how you compare to others in their spending.
Some financial services companies even offer sites just for teens that provide financial education and parental controls while giving kids access to their financial accounts.
Reviewed June 2021
About the Authors
June Walbert and Joseph “J.J.” Montanaro are both certified financial planners. June helps families get financially fit by sharing practical financial guidance on topics like tackling credit card debt, budgeting and planning for retirement. Joseph’s focus has been to help families realize their financial goals.
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