Money management for teens

By Carina Boucher | Citizens Staff

As a parent, there’s a lot that you need to teach your teen — like why it’s important to keep their room tidy, for example. Or that doing their homework isn’t optional. But arguably the most important lesson you could teach them? Money management.

Growing up, you may have given them some sort of allowance or taught them to put their birthday and holiday money from grandma in the bank. But things like budgeting, credit scores, opening bank accounts, and giving to charitable organizations, often fall to the wayside. Now that they’re young adults and about to enter the “real” world, these life lessons are crucial for your teen to learn. Money management for teens may be a difficult topic, but here are a few ways you can start to introduce it.

Needs vs. wants

When your teen is working and determining how much they can save vs. spend, it’s important to discuss needs vs. wants with them. Do they really need the newest phone? Or does the one they have work just fine? For kids to understand the value of money and money management, it’s important to distinguish between the two.

A need is something necessary to live and function — think food, clothing, shelter, and medical care. (That doesn’t include a fancy coffee or the newest kicks). Needs are the basics that they need to get through life. Everything else (including a new phone, video game expansion pack, or that super popular lipstick) are simply wants. Once they know the difference, they can figure out their budget accordingly.

Budgeting and saving

There’s a lot to think about when it comes to teaching your teen about money. Where should you even begin? According to Northwestern Mutual, 69% of Gen Z doesn’t have a clear understanding about how much money they should save vs. how much they can spend. So, creating a simple budget is a great place to start.

Giving them some insight into the family budget could be a great place to start. You don’t have to get into the nitty gritty of it — but explaining that you need things like gas for your car or groceries for the week, but that new couch is a “want” and it can wait until you’ve saved enough for it, can really help them understand the differences between the two.

Next, you can help your young adult create their own budget in a few easy steps:

• Determine their income: If your teen has a job or an allowance, they can count on that steady paycheck as part of their budget.
• Figure out their expenses: Does your high schooler pay for their cellphone, gas, or car insurance? You can add those up and explain that those are their fixed expenses for the month.
• Do the math: Subtract their expenses from their income and see if they have enough to cover their necessities. If they do, you can figure out how to use the rest — whether it be savings, fun money, etc.
• Set some savings goals: Ask your teen if they want to save up for a big-ticket item — whether it be college tuition, concert tickets, or even just some spending money for when they want to go to the movies. If the goal is long-term, you can determine how much they would need to save each month to make that goal. If it’s a shorter-term goal, you can split that amount into weeks, instead of months.
• Revisit it often: It can be easy for teens to go over their budget (let’s face it, it’s easy for us, too!) So if they overspend, you can help them look for ways to cut back, or increase their income by offering extra chores in exchange for a little bit more allowance, or even putting up flyers around the neighborhood to offer lawn mowing or babysitting.

Earning income

Having a job or some sort of income is an important way for your teen to understand the value of money. When it’s their first job (and their own money), they’ll be more aware of how they’re spending and saving. Plus, it teaches them responsibility, financial independence, and good work habits.

Some great ideas for part-time jobs for your teen are:

• Restaurant host/server
• Lifeguard
• Retail sales associate
• Camp counselor
• Dog walker
• Babysitter
• Tutor

If your teen doesn’t have a job, they could still earn money through an allowance by doing chores and helping you out at home — it’s a win for everyone! Some chores could include walking the dog, keeping their room clean, doing the dishes, vacuuming, etc.

Checking and savings accounts

Setting up your teen with a checking account or savings account (or both!) can help them reach their goals. Plus, seeing their money going in and out of a bank account helps them understand how it all works.

Checking accounts are typically used for everyday spending. They’re a great place for a paycheck to get direct deposited into, and can also include a debit card for your teen to use when they’re out and about. Some checking accounts earn interest, but not all.

Savings accounts are a good place for your teens to store their money. It will be tucked away in a place where they can’t access it easily, and they can watch their money grow — especially if they have a savings account that earns interest.

A great checking account option for a teen is a Citizens Student Checking account.¹ There are no overdraft fees, they can keep track of their spending through our mobile app* and they can take advantage of our Citizens Paid Early™ feature², where they’ll get their direct deposit up to two days earlier. If they’re old enough, they’ll also be able to get a debit card.

Made ready to grow

We’re made ready to help you and your teen through this next phase of life. They’re taking big steps, but with your encouragement and guidance, they’ll be prepared for whatever gets thrown at them. Teaching money management to your teen early on will set them up for financial success in the future.