Talking with teens about money

For teens, with new freedom comes responsibility—especially when it comes to finances. The more they understand about the realities of managing (and mismanaging) money, the less likely they are to learn certain lessons the hard way. 

So, how should you go about having a practical, helpful dialogue about money they won’t tune out? Use day-to-day situations as quick “teachable moments.” This can help shape their attitudes about money and build basic money management skills. 

As you go about explaining certain concepts, consider covering the following. 

Spending can be all about instant gratification, which makes it difficult to pitch saving for the future as a priority. That’s the beauty of piggy banks—they’re sealed until you need them! The key is motivating teens not to spend every dollar as soon as they get it. Use short-term examples like weekend activities and long-term examples like paying off student loans, a trip with friends, or a new phone to help them work toward goals.

Tip: Set up automatic transfers into a savings account on a regular basis (such as monthly, bi-monthly, or even weekly). 

Develop a realistic budget. Show them how money can be categorized by the way we choose to live life: eating out, entertainment like going to the movies, clothes and shoes, sports equipment, or hobbies like video games and music. Help them think through how much income they have and how they’ve been spending that cash. (There are even some fun apps with visualization tools that can make it a bit more fun.) This will help you to talk through priorities, wants vs. needs, and stick to their new budget to meet financial goals. 

Ask your teen which sounds better: Having car trouble and not being able to drive until you’ve gathered up the cash for a fix, or having a few hundred socked away to get back up and running? Teach them to prepare for the unexpected, like emergency situations or fees. 

Teach the value of balancing a checkbook—or logging in to their online banking to see where their balance is minus any pending transactions. This can head off overdrafts or maxed out cards.

Tip: Set up email alerts that send regular bank account balance notices so they’re always in the know. 

There’s very little leeway when it comes to paying bills on time. Help your teen understand there’s no talking their way out of missing payment due dates—and it can damage their credit score for the future.

Tip: If it’s a good option, set up online bill pay for recurring bills. 

Help them be smart about credit. It can seem like a mysterious topic at that age, and not something to worry about quite yet. Explain the importance of a good credit score as an adult, and look for ways to help them begin to establish a good credit history, such as adding them as an authorized user to your credit card account.