Money Management for Teens
Tips for Teaching Teenagers Money Management
The basics of money management for teens—teen spending, teen allowance, teaching teens to save money, and the ways in which teens earn money—are as important as any lessons parents can teach their children.
Teaching teenagers money management skills not only prepares them for later financial challenges but also lays a foundation for a future life of financial freedom.
There are several approaches families may take when it comes to the teen allowance. A couple of them work especially well when it comes to money management for teens.
One approach is that parents can provide a rather generous allowance and then expect the teenagers themselves to cover many of their own expenses. Depending on the amount of the allowance, teens could pay for entertainment, gifts, clothing, school expenses, gas for the car, etc.
Another approach is for parents to provide their teens with a relatively small allowance. This would be used to cover mainly entertainment expenses, with the parents providing for all of the other living expenses.
The method that doesn’t work so well in teen money management is for parents to provide a large allowance and then give their children extra money whenever they want it. This promotes an unhealthy dependence of the teen on the parents and sets them up for financial troubles later in life.
Teen spending is an area in which parents can guide their teens while letting them make their own decisions. One important piece of money management advice is for children to learn the difference between need vs. want.
They have to understand that they can’t always have everything they want. You as a parent can help them understand this by being a good role model. Tell them about things that you would like but don’t have because either you can’t afford them or you don’t feel they are worth the money.
We often think of teenage peer pressure as being a factor in enticing our children into reckless behaviors such as drinking, smoking, drug use, or sexual experimentation. However, it can also push teens to spend money carelessly on things that they really don’t need. This is another area in which the parent can guide the teen toward the best decisions.
Teens Earn Money
As already mentioned it is important for parents not to give their teenagers everything they want. A little unfulfilled desire is a good thing. It is a motivator. In this case, it may motivate you child to join the group of working teens. It is beneficial that teens earn money. A job promotes the teen’s sense of self-worth, encourages them to get along with others, and prepares them for the real world.
Teaching Teens to Save Money
There are many opportunities for teens to learn the importance of saving money. Parents should be teaching teens to save money on two levels. First of all, teenagers should be encouraged to save money to purchase something larger than their regular income will cover. This could be anything such as a computer, sporting equipment, musical instrument, or class trip. The time frame could be from a few weeks up to a year or more.
Secondly, a teen should be saving for a long term goal such as post high school education, a car, a down payment on a house, or anything that can’t be saved for within a year. This lesson in money management for teens will prepare them to have a long term focus on finances and saving for the future.
Teaching Teens to Give
Teenagers should be taught the value of giving to others. This starts with developing an attitude of gratefulness for what they have been given. Look for ways in which the whole family can participate in helping others such as working at food shelves or visiting people in nursing homes. Help them to find a worthy cause to give their money, like a church or charity.
Other Money Management for Teens Advice
Although most teens may not be very interested in learning about budgets, it is a good idea to introduce the concept of budgeting to them. This can be a natural extension of discussions about allowances and spending. It may even be fun for them to experiment with this personal budget worksheet to see if their income will cover their expenses.
Another lesson in money management for teens is for them to have their own checking account. It is good for a teen to learn how to write checks without overdrawing his or her account and how to balance a checkbook. Be sure to monitor the checking account to make sure your teen is making wise decisions.
Remember that it is important to be supportive of your teenager as they learn to handle money. You, as a parent, can provide an environment where your child can learn to make good decisions in handling money. Money management for teens prepares them to be successful in handling finances as adults and launches them toward the goal of financial freedom.
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