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How to Talk to Your Teens About Money

There should be more doing than talking involved, if you want to get your point across.

Written by Elaine King / June 30, 2022

Quick Bites

  • Difficult as the teen years may be, it’s a good time for you to help put your child on the path to financial wellness.
  • Having them save for something they really want can be a powerful tool for learning the importance of budgeting for reaching their goals.
  • If you haven’t already, it’s time to open checking and savings accounts for your teen.
  • You’ll also want to start teaching them about investing, and setting up their own brokerage account is key.

When I was a teenager, I caught my mother reading a book called “How to deal with your teenager.” I was confused and wondered, why doesn’t she just ask me? Little did I know that a child’s teenage years are the hardest years for a parent, because the kids are not motivated by ice cream anymore but are not old enough to leave the house without permission. On top of that, helping them deal with money is challenging.

Today, teens are more sophisticated and 30% prefer to shop at specialty stores rather than chain stores. But they’ve also experienced the Great Recession and have been defined by the 2020 pandemic—making them want to see the world and conquer the world all at once, but with limited budgets. And parents need to be extra careful when talking to their teens about money, considering 61% of teens look to their parents or guardians for financial advice.[1]

The best way to “talk” to your teen about money is by example—you are the role model and can offer practical advice that they can apply right away. Simply talking about earning, spending, saving and investing as concepts will just go over their head. Here’s advice for how to get your point across about money, so that your teen will not only understand it but put your advice into practice, and appreciate it for the rest of their lives.

Step 1: Help your teen find a job

For a teen to appreciate the value of money, they must earn it. This can be challenging since fewer than 36% of teens have a paying job and it may interfere with school, activities and sports.[2] But which teen does not have a couple of Saturdays a month to work at a store or their favorite restaurant? The amount they earn is not as relevant as the act of earning it.

Elaine King

Meet the Expert

Elaine is the founder of Family and Money Matters™. She has served as the Family’s Financial Planner for over 1,200 families and 100 multigenerational family enterprises crafting actionable family financial plans. She was recognized in 2020 in the list of Investopedia's Top Influential Advisor and in 2017 recognized by People Magazine’s Top 25 Influential Hispanic Women.

Alternatively, you can give your teen an allowance based on their completing extra chores around the house, and match the amount you pay them with how old they are. For example, if your teen is $15, give them $15 a week for extra chores. Besides tying the allowance to extra chores, other parents have also based it on good grades, sports or habits. Earning should be associated with something that they are good at and that they enjoy doing.

Step 2: Show them how to budget

I coach my clients’ teens, and the first question they all have is how should they spend their money.

In my experience, kids are either spenders or savers. Either way, this is the golden opportunity to teach your teen about the art of budgeting and since teens spend 22% of their money on clothing and 33% in restaurants, use these categories when building a budget for your teen.[3]

Fold a paper in half, and on the left side write “Money in” and on the left side write “Money out.” In the “Money in” column, add their birthday money, gifts, allowance and pay from their jobs. In the “Money out” column, add clothing, restaurants, sports, gifts, supplies, transportation and any other spending.

It is important to do this together and keep track of it for at least three months. You can choose to do this exercise in a spreadsheet and share it with them or use an app such as Mint that can be linked to your teen’s bank account.

Step 3: Open two bank accounts for them

Besides talking to your teen about earning and spending, it is key to teach them about savings.

The best way to talk to them about it is by making use of something they want with all their heart—it can be a laptop, a new phone, a trip. Choose something that costs more than $100 and that they can save for in 6 to 12 months or something that is over $1,000 that will take them longer than 12 months to save for.

For this to make sense to them, they must have a checking account with the amount of money they need to spend and a savings account with the amount of money they are saving toward the goal. This is to teach them about the importance of saving with goals in mind and that “spending money” should be separated from “saving money” to avoid overdrafting. Consider rewarding them when they get close to their goal.

Step 4: Set them on a path to grow their money

This may be a little bit challenging for kids at the beginning, but with your help, doable.

First, explain to them what a UGMA or UTMA account is (if you opened bank accounts already they should already know). Make it clear to them that the money is theirs once they reach 18 or 21, depending on their state and type of account. Ideally you will open it with your investment advisor or a reputable online discount broker dealer.

Make sure you understand the cost of opening the account and the trading fees on investments before you open it—you don’t want to spend your teens’ money on unplanned fees.

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Some of my clients give their teens financial education coaching and/or financial planning classes for their birthdays. It is a great investment that will pay dividends long term.

Emotionally, teens are wired to listen to their parents about going to school, doing their homework, taking a shower, etc., but it is different for a parent to talk to them about their money and investing. Parents can offer specific advice, such as how to invest during a recession or how to begin investing with small sums of money. Choosing a third party facilitator, advisor or coach gives them the space they need to ask questions freely, and learn the financial lessons that will help them now and in the future.

Article Sources
  1. “Early Warning–Signs of Financial Abuse Beginning in Teen Relationships,” Junior Achievement, https://jausa.ja.org/dA/27b89bed2f/criticalIssuePdfDocument/Early%20Warning%20%20Signs%20of%20Financial%20Abuse%20Beginning%20in%20Teen%20Relationships.pdf.
  2. After dropping in 2020, teen summer employment may be poised to continue its slow comeback, Pew Research Center, June 21, 2022, https://www.pewresearch.org/fact-tank/2022/06/21/after-dropping-in-2020-teen-summer-employment-may-be-poised-to-continue-its-slow-comeback/.
  3. Taking Stock With Teens, Piper Sandler, fall 2021, https://www.pipersandler.com/private/pdf/TSWT_Fall_2021_Full_Report.pdf.

About the Author

Elaine King

Elaine King

Elaine has served as the Family’s Financial Planner for over 1,200 families and 100 multigenerational family enterprises crafting actionable family financial plans.

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