Offering teens financial advice for setting goals, budgeting, and managing a bank account provides them a foundation for future economic success. According to recent research, 51% of today’s teenagers between the ages of 13 and 17 report that they consider themselves well-informed on important financial topics such as spending, saving and investing. And while it’s good news that a majority of those surveyed feel this way, the data also indicate that nearly half of today’s teens feel that their financial knowledge may be lacking. This is where you can help, parents.
When To Start Offering Children Financial Advice
Some financial experts advise that the teenage years are among the best to begin teaching money management. Parents can tailor financial advice for teens to meet their age levels and deliver additional money management tips as children mature. Many adolescents are ready to begin taking on greater roles in their personal finances and understanding more complex concepts. Any teen starting an after-school job, saving for his or her first car, or managing an allowance independently can benefit from a parent’s personal finance advice.
6 Personal Finance Tips for Teens
Your child won’t build perfect money management skills overnight, but with a good foundation, he or she can foster an understanding over time. Follow these six tips geared toward building personal finance know-how for teens to help your child(ren) become more responsible and develop good money habits:
1. Establish priorities and set goals
For many of us — and especially for younger consumers — spending on in-the-moment wants can be tempting. But by exhibiting financial restraint and preparing for the future, we can save up for bigger-ticket items that we may want even more. To help your teen strike a better balance between impulse buying and saving up for longer-term financial goals, encourage him or her to establish priorities and set goals.
- Create a list of current and future financial priorities.
- Help your teen develop a plan for reaching each of his or her long-term objectives, offering financial advice for earning and saving toward each goal.
- Discuss money-management mistakes as they arise to help your teen learn from them and hopefully avoid or correct future missteps.
2. Discuss the Connection Between Emotions and Money
By teaching your teen to recognize when emotions may be motivating his or her spending, you can help him or her avoid unnecessary expenditures in the future. Leading types of spending mistakes that can derail personal finance for teens include:
- Impulse Buying: making unplanned purchases without applying adequate logic or thinking things through
- Retail Therapy: spending money in an effort to feel better or to achieve an emotional gain
- Social-Pressure Spending: Making purchases to impress others or to meet social expectations
3. Build and Follow a Basic Budget
Budgeting is excellent financial advice for teens because it is an essential skill that serves them through adulthood. It typically takes a good bit of time, effort, and commitment to master. To get your teen accustomed to creating a budget and sticking to it at an early age, help him or her use a worksheet, spreadsheet, or budgeting app to set up a personal finance plan. Even if he or she doesn’t have a lot of income to work with, making decisions on how to allocate money and later discussing budgeting outcomes with you can help your teen become more comfortable with the process and understand how it works.
4. Keep Track of Spending
A big part of financial success is keeping a close eye on your spending and having a firm grasp on where your money goes. To help your teen get into the habit, encourage him or her to record their expenses and categorize them into areas such as entertainment, dining, hobbies, etc. Whether using pencil and paper, a spreadsheet, an app, or via another route, your teen can better understand how he or she is spending money — and identify where to adjust spending habits that might need improvement.
5. Consider Opening a Bank Account
Opening a checking account and/or a savings account for your teen is a big step in personal finance with many perks and learning opportunities. With an account, he or she has a go-to place to put money earned and can enjoy the protections provided by carrying checks or a debit card instead of cash. And the potential benefits only improve from there. An account will give your teen a designated place to set aside his or her savings and an easier way to track income and expenses. It also helps your child gain experience using modern banking tools and technologies such as ATMs, digital banking, and mobile banking apps. And by using a checking and/or banking account, your teen can become more acquainted with basic transactions such as deposits and withdrawals, as well as with the associated fees and earnings that come with bank accounts, such as overdraft fees and interest. All of these things can give your teen a head start on mastering the money-management tools he or she will rely on in the future.
6. Teach the Power of Compound Interest
A more advanced yet powerful piece of personal finance advice for teens is to “let their money work for them” through the concept of compound interest. For younger consumers, learning these personal finance concepts as teenagers can lead to powerful long-term investment opportunities. Using tools such as the compound interest calculator at investor.gov — and maybe even by funding early investments for your teen and watching them grow together — make sure he or she understands the power of compound interest and the long-term benefits it can provide for their financial future.
Have Questions About Banking or Money Management? Arthur State Bank is Here to Help
Proudly serving South Carolina since 1933, Arthur State Bank offers accounts and services to meet a variety of financial needs. To help you achieve all your financial goals, the bank offers in-person service as well as a range of convenient digital solutions. To learn how Arthur State Bank can help you with banking needs ranging from checking and savings to retirement accounts, mortgages, other personal loans and more, visit arthurstatebank.com.
