Teenagers Money Management

Teenagers need to be taught money management so that when they move out on their own they will be able to handle their money wisely. You don’t want them to fail and have to move back home just so that they can pay off their debt.

How to Get Started

If your child does not already have a savings account, help your child open one. A teenager should also be able to open a checking account. Anyone under the age of 18 will have to have a co-signer since minors cannot be held responsible for contracts.

How Your Teen Can Make Money

If your teenager does not have a job, there are several ways to earn money. Here is a list to get you thinking:

• mow lawns
• rake leaves
• wash cars
• pet sitting
• selling on eBay

Things They Need to Know

Show your son how to write checks and update the register every time he writes a check or uses a debit card. Then you will need to show him how to balance his checkbook every month when he receives his statement.

Motivation

Your teen may need a little extra motivation to get started, but once he or she has their own money to spend, they will be more motivated. To help motivate them, have them write a list of the big ticket items that they would like to have. A car is a good example. Even if you help them buy one, they should have money invested in it also. Then you can start teaching your teen how to budget for these items that they want to buy. If your son is going to buy a car, how much does he need to save each month to reach the set goal? How much will insurance cost? If he buys a used car, he needs to budget for repairs.

Long-Term

It is hard for most of us to think about the long-term. In fact, according to the Employee Benefit Research Institute, 58% of American workers have not even calculated what it would take to retire with dignity. An attitude adjustment is needed if we are going to be successful as individuals and as a nation. Americans’ desire for instant gratification has caused all sorts of debt problems. We cannot blame it all on others and our nation when we as individuals are just as guilty. Are you like a toddler in a poopy diaper? Are you comfortable in the mess you are in? Are you saying, “It may be stinky, but its warm and its mine.” It’s time to change.

You need to teach your teen the rule of 72 (72 divided by interest rate equals years) and show them how they can become a millionaire by starting to save now rather than later. Sit down together and calculate some figures to show them how starting by saving a little now can add up to so much more than waiting until they are older.

In the United States, a $30,000 per year income places you in the lower middle class. Did you know that you can become a millionaire on this income in just 46 years? If you start putting away 10% of this income at age 22 in a good mutual fund or investment that will give you a 10% return, you can be a millionaire by age 68! This even takes into account a 3% inflation rate. What we haven’t added in is that most people make more money as they advance in their career. So you can shorten the time as you move up the corporate ladder.

Help your teen set up an emergency fund now that can grow as their income grows. This is essential. Unless you have an emergency fund, everything that goes wrong is a crisis. Once you have one, life will be less stressful.

Not only does this teach your teenager about managing their money, but it also helps them learn the value of their time and money. For more information on starting a savings account, see our article How Do Guys Save Money?.