How do you teach your teens about money management?
I grew up in a paycheck to paycheck household, with frequent games of checkbook roulette and more than a few bags of groceries paid for with change. And that’s no surprise. A 2017 study by CareerBuilder found that nearly 80% of us workers don’t have the financial cushion to cover expenses if they’re missing some income, and 44% of American household funds can’t survive a $400 emergency. My family never talked about money management when I was a teenager so it’s important to me that my daughter has some financial footing. We started early and talked about money in an age-appropriate way (read: we talk about value and cost and choices, not household finances), and now at thirteen, she’s got a pretty good grasp on money management.
Here’s How We Taught Money Management to Our Teen:
Aside from presents, all her money is earned. I don’t believe in allowance for doing household chores; everyone in the family needs to contribute. However, she is assigned specific jobs with metrics and can only earn her scratch by doing them without being reminded. Extra jobs can mean extra money (and that momma doesn’t have to match socks).
Pay the future first.
Of my daughter’s biweekly “paycheck,” 60% goes into savings, and 40% is available for spending. Get kids used to paying themselves first so saving part of a paycheck or contributing to their 401(k) seems natural.
Skip paper money.
We use a teen spending card because cash is easily lost. (Banks often have programs that support teaching money management to teens. Check out what programs your bank offers.) I can monitor spending through alerts and limits, move money in and out of her accounts, and my daughter can to see her money in the app. Plus there’s the convenience of a MasterCard logo debit card, which she can use pretty much anywhere.
We used to have a 50/30/20 rule, where 50% of savings, 30% to charity and 20% for spending, and periodically, she’d pick a charity and we’d make donations from their wish list. Now, it’s a little less structured, and she does a lot more volunteering than donation, but as part of money management, giving back is not optional, even if it’s a little treat now and then to brighten someone’s day.
Set savings targets.
It doesn’t matter how much or even really why. Whatever will get your kid hyped. Maybe it’s a race to a certain amount or for an important cause. Could be holiday shopping. Maybe it’s a competition with a sibling to see who can save more. My daughter set her own savings target when we were headed on vacation, envisioning blowing loads of her very own cash on slices of New York pizza and fists full of souvenir key chains. Have a goal is motivating.
Contribute to choices.
If there’s a special item that’s outside normal budget constraints, make your teen responsible for part of the cost. If they want to stop for ice cream after tennis, let them spend their own $4. Have them cover a portion of the extra fancy backpack that’s outside the school supply budget. You can be a good parent and still have your kid cover part of the cost of things they don’t need. It’s an organic way to teach budgeting and money management to teens.
Pay the consequences.
Lost a third pair of chem goggles? That $2.50 is on you, kiddo. Let that library book rattle around in your backpack for six extra days? Support your local library with $1.80. Small, simple ways to be accountable for actions build responsibility. When you get $10 spending money every two weeks, those chem goggles manage to stay closer to the nest.
Model good behavior.
I love a splurge. I really do. But my daughter also sees me skip or sacrifice. Sometimes you put back the jeans that fit like a glove because they are out of your budget. Sometimes you eat out every meal all weekend because it’s fun. Be appropriately vocal about what things have priority and add value.
Starting these behaviors with little ones and finding ways for your child to get excited about saving at any age lays the groundwork for smarter money management in their future. That’s an investment we parents can buy into.