Money Management Lessons for Parents to Teach Teens

Are Teens Financially Ready for Adulthood?

Earlier this year, the Department of Education and the Treasury Department released the results of their third annual financial literacy challenge, a test administered to high school students throughout the country.

• The average score this year was 69%, highlighting that today’s students are ill-prepared for the financial responsibilities they’ll face as young adults.
• Despite this lack of financial education, young people still open credit cards, purchase cars, and take out student loans.

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Personal Finance Skills to Teach Your Kids

With little education about money management in the typical high school curriculum, parents are often the best resource when it comes to educating teenagers about finances. Here are some personal finance skills to teach your kids.

1. Educate your teen about budgeting. Most teens don’t have too many expenses, so the budget should be simple. Show them how to track their spending for a few weeks, and then to set spending limits. If your kids are able to save money, whether from an allowance, or a part-time job, reward them for their efforts. Ultimately, kids will learn the most about budgeting from watching their parents. Do you ever find yourself thinking: Do as I say, not as I do…? Take a look at your own spending behavior. Chances are your own money management habits will rub off on your kids.

2. Open a checking account for your teen, with yourself as a co-owner, so you’ll also be able to access the account. You can teach your teen about depositing money, using a debit card, keeping a record of all purchases, and monitoring the account to make sure it’s not overdrawn. This way, your kids won’t have to learn about overdraft fees the hard way.

3. Introduce your teenager to credit only after they’ve shown they can handle a checking account. By opening a joint credit card account with a low credit limit, you can help your teen build credit. You should monitor the statements as well, because missed payments will also reflect negatively on your credit report if you’re a co-signer. Explain why making payments on time is so important by showing them a copy of their credit report at AnnualCreditReport.com. Also stress to your teen why they should pay off their credit card balance in full each month – to avoid having to pay finance charges, and to stay out of debt.

Preparing Teens for College and Beyond

With so many teenagers going off to college with little to no financial background, it’s no surprise that student loan debt becomes overwhelming.

Before They Leave Home:

• Provide your teen with a solid foundation in credit and money management.
• Educate them about the long-term impact of student loans and the importance of borrowing responsibly.

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Help Your Kids Build a Better Financial Future

By teaching your kids these essential financial skills early, you give them a better chance at success when they go off to college or move out on their own.

Empower your teens with the tools they need to navigate personal finance, and they’ll carry those lessons with them for life.

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