Helping Your Teen Learn How to Manage Money

My two teenagers recently received postcards in the mail from our bank. The cards offered special checking accounts with a $50 bonus and trendy debit card designs.

Yikes. I still like to keep track of my kids’ Christmas gift checks, and I can’t imagine them carrying around their own checkbooks or debit cards.

When Should Teens Get Financial Freedom?

With one child now driving and working, my husband and I are trying to figure out the best way to help her learn to manage her money. Since she is earning some dough, we want her to be responsible for paying for her own gasoline, as well as numerous other things we’re tired of footing the bill for.

We also want her to save, budget and quite frankly, learn to live frugally. On top of all of this, we also want to teach our children to give to charities, others and their church.

So how is the best way to do all of this? This is our first rodeo with teens and finances, so we don’t know what works and what doesn’t. Checkbook? Debit card? All cash?

What Do Financial Experts Say?

To get a little professional help, I turned to advice from well-known financial expert, author and radio host Dave Ramsey, who offered the following guidelines for teens and finances:

1. Teach your teens how to make a budget.

I completely agree with this concept because I think anyone who makes money and spends it should have a budget. It helps avoid having too much “month at the end of the money” and will help teens live within their means.

2. Teach them how to have long-term savings goals.

I love that today’s paychecks are primarily direct-deposited into a bank account. If you don’t see it, you won’t spend it.

My husband and I want a good portion of our daughter’s paycheck to be kept in savings for college, life transitions, etc. Long-term saving is a hard concept for all of us because we would rather spend the money now and buy what we want. Learning to save at an early age will be a huge benefit for the rest of their lives.

3. Don’t give them credit cards.

Ramsey says, “A teen with a credit card is only slightly less dangerous than a teen with a gun.” I agree. I don’t want a credit card in my kids’ hands until they’re at least 40.

I even have difficulty with the idea of my teen carrying a debit card. It’s too easy to use the plastic (or checks) without fully thinking it through. Mastering how to balance and keep track of monthly expenses vs. income is a must before graduating from all cash to plastic.

What Are the Challenges for Parents?

My big challenge will be to let the budget be hers. In other words, I won’t tell her how to spend her own money. But I can offer a few simple guidelines here and there, such as: “If you go to the fancy smoothie shop everyday, your entire paycheck will be gone during the first week of the month, and I won’t lend you cash when you want to go to the movie with your friends.”

Teaching financial responsibility is a pretty big undertaking for parents, but it’s important, and the lessons learned will be crucial throughout the rest of their lives.

What are your experiences—good or bad—with your teens and their finances? Please share your advice for parents who are new to this.