Personal Finance Tips for Teenagers

It is important to teach kids about money and personal finance when they are children and teenagers so they are less likely to get into financial trouble when they get out on their own. One way to teach teens about finances is through experiences they connect with.

People have differing opinions on giving allowances. In some families, there are chores such as making a bed, setting/clearing the table and other tasks that are considered family responsibility. Some offer more money for other types of work or duty.

Some families that give allowances recommend how the kids allocate their money; for example, 20 percent to donations, 20 percent to investing and save at least 20 percent for a future goal.

You can teach your kids about personal finances by using your daily experiences. When you go to the bank, explain to your kids what you are doing. Show them how to fill out a deposit slip and writing checks. Today, many teens will not need to write checks but they still need to know it is important to record their spending.  Many people get into trouble when they use a debit card and don’t keep track of the spending. Explain to them that they will be charged by the bank if they overdraw their account. The fee can be up to $39 for each debit that your account is overdrawn. A $2 burger can cost you a lot more if you have a number of debits occur at the same time and you are charged overdraft fees.

When you are shopping, if you are using a debit card, explain that the money will come out of the checking account.  If you are using a credit card, explain that if you don’t pay off the balance in full when the bill is due, you will be charged interest. 

Some people think they are doing alright financially if they can pay the minimum payments on their accounts. In many cases, the minimum amount due is barely paying the interest payments so you are not making much progress paying off the principal. You will end up paying a considerable amount more for the items than the original cost.

Explain the power of compound interest. If you save money, it can be a great tool. Each month, the amount of interest you earn is added to your account. The younger you can start saving money the less of your own money you will need to put away. The more years the money has to grow the more you will have. 

If you owe money, it can take longer to pay off your balance. Each month you carry a balance, the interest amounts will be added to the balance. 

Some parents will lend their teens money, but if you do, charge them interest. It is better for them to learn the price of interest before they get out on their own. They may reconsider borrowing money when they know what the costs are.

There are many ways to teach teenagers about personal finance before they get out on their own.