Do you want to teach your teenagers about money, but don’t know where to start? Here are some simple money management lessons to teach your teens about money.
How to teach teens (and preteens) about money management: 11 important tips
Teaching teens about money management and budgeting skills should be one of the most important classes in high school.
Unfortunately, poor money habits can break you and set you up for a hard life (or a hard life lesson).
I don’t remember learning anything about money or budgeting specifically in school (maybe a lesson here and there), although I learned a bit from my parents.
Even though my daughters are only 5 and 3, I don’t want to wait until they are teens before I think about what I want them to know.
I know that I wish I could have learned more and been better prepared for my financial life as an adult before I had left the teen years.
Don’t wait until your kids are 17 or 18 to start talking about money and budgeting or start asking questions about what they are learning (or not) in high school about these subjects.
Start early!
Even 12 or 13-year-olds can understand a simple budget and talk about credit and debt.
You can easily introduce concepts through normal, everyday experiences.
If you are shopping for back to school clothes with your teen (or preteen), talk about your clothes budget:
Tell them you have X amount of dollars to spend on clothes and that they need to purchase at least X number of jeans and shirts (for example) and help them figure out how to stay within budget and find what they need.
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Here are important lessons to keep in mind when you are teaching your teens about money:
1. Show your teenager how to make a budget
First, sit down with your teen and show them step by step how to make a budget.
You don’t have to get fancy. Take a small notebook that is dedicated specifically for them to keep a budget.
On the first full-page spread, have them track their income for the month on the left and their expenses for the month on the right.
At the end of the month, go over it with them and talk about it.
Related: Budgeting for teens: an easy guide
2. Discuss debt with your teen
Tell them about the different types of debt that people have and why:
- student loans
- car loans
- mortages
- credit card debt
Talk specifically about credit card debt and explain that credit card companies often target college students.
Help your teenager to think about the temptation of credit cards and what to do about it.
Compare interest rates.
Show your teen the interest rate on several credit card sign-ups (and compare the introductory rate vs. the regular rate) and talk about how when you charge a purchase and pay it off slowly you will end up actually payingmore for the item than it was originally worth.
(So, a $25 purchase could end up costing you $50 with interest – or more!) This is an extremely important message to get your teen to understand.
Related: Credit Cards and Teens: What they need to know
3. Teach your teen how to avoid debt
While talking about debt with your teen be sure to discuss how to avoid debt.
Talk about ways to save money for a larger purchase (even a car or college) and the benefits of living debt-free (you don’t owe anyone any money!).
You can even discuss ways that your teen can minimize her college debt (and even avoid student loans altogether), by:
- taking classes at a community college for less money (or free while still in high school!)
- attending an in-state university
- taking a part-time job while in school
- applying for scholarships (start early – don’t wait until senior year of high school!)
- postponing college a year or two after high school (and working during that time)
- apprenticeships
Related:Help your teenager graduate without college debt!
4. Open a checking account and give your teenager responsibility
The best time to have your teen learn about a checking account is when he is living with you and under your guidance.
Take him to the bank and help him open an account.
I remember my mom taking me to open a bank account and showing me how to balance it each month.
Go over the bank statement every month with your teen.
5. Discuss savings and long-term goals
When teaching teens about money, be sure to include a lesson about long-term savings goals for things like:
- college
- car
- house
- vacations
Encourage your teen to start saving now for any (or all of these goals).Also, make sure that you explain the importance of having money set aside for emergencies.
This is aGREAT opportunity to talk with your teen about the difference between needs andwants.
Explain to her how you can save more for a bigger purchase by cutting out something that is not a need (like your daily Starbucks coffee) and putting that money in a savings account toward a larger goal.
A note on saving for a big purchase: If your teenager wants to buy a big-ticket item (a car, for example) and you are financially able to match them dollar-for-dollar for their purchase, this might be a good opportunity to teach them the value of perseverance in saving.
(I would have them buy their own gas and extras and teach them how to budget for car repairs – but be compassionate in helping out if they need it.)
Related: Teach your kids to save money
Related:Emergency Funds Made Easy
6. Have your teens start earning their own money (if they don’t already)
Get your teen to start working (even just a few hours a month). This helps teach personal responsibility and gives your teen self-confidence and skills for the future.
If your teen isn’t working, help her brainstorm ways of earning extra money. Try to think outside of the box.
For example:
- babysitting
- yardwork
- odd jobs
- seasonal work
- pet care/dog walking
- online work (proofreading, writing)
- tutoring
- cleaning house
- coaching/camp counselor
- “flipping” items*
- starting a mini-business
*Your teen could scour the free section of Craigslist (for example) and find items that could be fixed up a bit (painted, polished, etc.) and then resold.
Related: Help your teen prepare for their first job
Ideas for Kids and Teens to Earn Money
7. Teach your teen how to read a paycheck
When your teen gets her first paycheck, go over each part with her and help her decode it.
Talk about:
- Gross income vs. take-home pay
- amounts that are taken out for taxes, retirement, health insurance
8. Don’t buy them everything they want!
Once your teen has some regular income have her start purchasing certain extras with her own money.
For example, you can set a clothing budget and tell her that you, as a parent, will purchase X dollars worth of clothing for the school year, but anything extra is her responsibility (barring any unforeseen accidents or unusual circ*mstances, of course).
Discuss and decide what “extras” are with your teen.
9. Encourage giving (tithing)
Show your teen ways to give back to the community (donating to emergency relief funds, tithing to your church, helping an important cause, etc).
Look at the news and talk about ways and organizations that help people in need (from natural disasters, war, homelessness, etc.).
Lead your teen to have a big heart for others as well.
Tell her she can also give of her time and talent and belongings in addition to money.
10. Investing
No, it’s not too early to talk about investing or saving for retirement!
This is especially important if you yourself got a late start on this (like me!).
Don’t let your teen start late. Talk about it now.
Be sure to explain compound interest – how money can earn interest over time and that it is best to start young!
When I was student teaching for my master’s degree, I observed another math teacher and she was telling her students how her son saved a bunch of money (on his own accord!) and had a very large down payment on a house when he was in his early twenties and right out of school. I was amazed!
Related: Teach Kids about Investing
11. Model and teach contentment
Finally, make sure that you teach your teenager how to be content with what he has.
Part of the problem in our country is that everyone seems to want to keep up with the Joneses (you know them, those neighbors down the street with every new fancy electronic gadget and the latest cars, who take the fanciest vacations).
Be grateful and content with what you have (while still saving up for a larger goal) and model that to your teen.
Avoid comparing your life to someone else’s. Definitely hard to do at times!
Don’t feel overwhelmed if you didn’t start off your adult life well with managing your money – set a good example and get help with your finances now if you need it. If you need to pay off debt, then set a budget and a plan now and show your teen how you are going to do it. Teaching your teens about money starts with you modeling good money habits yourself. You can start now and help her have a head start on money management and budgeting! If you have any other tips for helping teens learn about money and budgeting, I’d love to hear them!
For further reading, check out these great books:
Smart Money Smart Kids by Dave Ramsey and Rachel Cruze
Make Your Kid a Money Genius by Beth Kobliner
This was the best book I read to help me get my finances in order and explain investing in a very simple way: The Simple Path to Wealth by JL Collins
