Money management for teens: A parent's guide to teaching budgeting, saving and smart spending

By E. Napoletano

Money management is a life skill every teen needs and many are already taking initiative. In fact, 74% of teens are participating in social media challenges designed to boost their savings habits, according to a recent study by NatWest Group. That's great news for parents: your teen may be more financially savvy than you think.

Knowing this can make starting the conversation easier. Whether your teen already tracks their spending or is just learning the value of a dollar, now is the perfect time to guide them toward healthy financial habits. From budgeting to goal setting, the tools you introduce today can shape their confidence and decision-making for years to come.

How to help your teen build a budget

The foundation of teen money management starts with a budget — and your teen might already have. According to NatWest Group, 69% of Gen Z teens use budgeting strategies, likely due to social media savings challenges that have gamified the art of tracking finances.

If your teen has a budget, terrific. You may want to review it with them to understand their goals and thought process. If they don’t have one yet, these simple steps can help:

• Start with income: Include all income streams, like part-time jobs and allowances.
• Track expenses: Encourage them to list everything from snacks to phone bills.
• Do the math: Subtract expenses from income. If the result is negative, it opens up a discussion on needs vs. wants.
• Set some goals: Help them identify short- and long-term savings goals.
• Monitor progress: Regularly reviewing their budget helps them adjust and stay on track.

Needs vs. wants: teaching smart spending habits

You know your teen best - and that gives you insight into their motivations and habits. Teaching the difference between wants and needs can help teens make thoughtful spending decisions.

Here's a scenario: Your teen wants to go to a concert with friends, but tickets cost $200, and they only have $75 left after covering essentials. Instead of saying no, walk through the options:

• Can they pick up extra shifts at work?
• Could they dip into savings and weigh the trade-off?
• Would putting it on a credit card be worth it, and what's the payback plan?

A problem-solving approach helps your teen run through all the possible scenarios to pay for what they need and still get what they want. Helping them evaluate all outcomes encourages responsibility and critical thinking. From there, they can decide if the "want" is worth it.

How to set and reach savings goals

Saving is a crucial component of money management. Help your teen set realistic goals and break them into manageable milestones.

Say that your teen wants a car. You and your teen have agreed to each contribute $2,000 to that goal. Knowing they need $2,000 is a start. Now help them build a path to turn their $2,000 into a car.

Some ways to encourage your teen on this journey are by:

• Setting weekly or monthly savings targets to track progress.
• Celebrating milestones (e.g., every $500 saved).
• Reinforce motivation with small rewards like a pizza night.

This is also the time to introduce the concept of emergency savings. Use examples like car repairs to help them plan for the unexpected. A good rule of thumb is to have three to six months of expenses saved.

Why every teen needs a checking and savings accounts

One of the top ways to bring teens and money closer together is to set them up with their own bank accounts. Whether it's a checking or savings account (or both), putting them in the driver's seat can help them see firsthand how money management works.

• Checking account: ideal for everyday spending. With direct deposit, your teen can access paychecks, use a debit card and monitor spend with banking apps.
• Savings account: great for storing funds for future goals and building habits around delayed gratification and interest.

A great checking account option for a teen is a Citizens Student Checking account^†. With no overdraft fees and an app to track their spending and saving, your teen could be keen to sit in the financial driver's seat. Plus, they can take advantage of our Citizens Paid Early® feature, which can make their direct deposit available up to two days early.^†

Savings accounts are a good place for your teens to store their money. Savings accounts can reduce the temptation to spend since the money's more than an arm's reach away. They're also a helpful way for teens to learn the power of compound interest as they watch their savings grow.

The benefits of checking and savings accounts for teens can't be overstated. By putting your teen in charge of their money before they leave the house, you're helping them take responsibility for their complete financial picture.

Income ideas for teens

Having income is essential to practicing money management. A part-time job gives teens experience with earning, saving and balancing responsibility.

Some ideas for part-time jobs for your teen include:

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

If an official part-time job doesn't fit with your teen's current schedule, there are other ways they can earn some cash. From projects around the house to working flexible hours for families around the neighborhood, your teen can seek out opportunities that fit their schedule.

Teach your teen the financial basics of adulthood

Money management for teens also means preparing teens for adult responsibilities. Teach them the basics before they leave home:

• Rent: Practice by "charging" rent for privileges like using a car or game console.
• Taxes: Review your tax return together or help them file if they have income.
• Retirement: Show them how your retirement accounts work and discuss the power of compounding interest.
• Debt: Talk openly about debt, credit cards and paying interest.

Finally, remind your teen that their savings goals will evolve. It's important to revisit those goals and make sure that their spending and savings align with the things they value most. These early conversations normalize adult responsibilities and build long-term awareness.

Give your teen the tools to start banking confidently

Money management for teens doesn't have to be stressful. It can be empowering. Helping your teen open their first checking and savings accounts gives them the tools to align their money with their goals. Start them off with the financial tools they need to succeed with a Citizens' student checking account and savings account. This powerful financial duo can be the first step on a long road filled with financial wellness.