Money 101 - Teaching Teens About Money

Parents often look for ways to help educate their children on the basics of money. Financial education is not typically a class taught in our schools. As children grow into their teens, they start to think about part-time jobs, spending money, and how they can purchase items they want. Here are some tips to help your teens make it into adulthood with a sound financial understanding.

Make Them Responsible

Just like a first-grader who wants to choose what shirt to wear to school, teenagers want to be able to flex their financial muscles from time to time. The more you can teach and role model good financial behavior, the easier it will be for your teen to understand the responsibility of choosing wisely when it comes to money. Giving your teen choices on some minor financial decisions will help them be better prepared for making wider choices later on.

Teach Budgeting

Budgeting can be scary, especially for those parents who don’t have their own budget. Think of it this way. Budgeting is just knowing how much money you have coming in, going out, and where it’s going. Providing a stipend for chores will help your teen understand the value of money. And it will give them the finances to begin setting a budget. If they know how much they will regularly receive, they can estimate how much they can spend. Making good choices is the topic of our next tip.

Wants vs. Needs

Like setting a budget, choices on what a teen “wants” and “needs” should be easy to understand. In the most basic sense, needs are the things that help us sustain our day-to-day life, like food, clothing, and shelter. Beyond those needs are the things we want. Something like a new gaming device, tickets to a concert, or the latest smartphone. It’s also essential for you to help them understand that their wants may have to wait when money is tight.

Bank Account Basics

We have become a more online-dependent society. Many people rarely step into a bank or other financial institution. But it’s still essential for your teenager to understand banking basics. Here are a few things they should know:

• Minimum balance requirements
• What it means to be overdrawn
• How to look at overdraft and other service fees
• How to access their account information
• The difference between checking and savings accounts
• How to see what they’ve spent their money on

To get the best balance of independence and supervision, you can set up a joint account that allows them to manage and monitor their money while you can follow along and help guide them. And that leads us to the next tip.

How to Pay Bills

Many of today’s teens will go through life without writing many checks. But it’s still a good thing to know. But if they don’t write paper checks, they should know how to set up payments in their online account. After all, we must pay for our purchased items. This may also be an excellent time to help them understand basic financial payment information, such as utilities, property taxes, mortgages, auto loans, and other bills they may not even think about but will need to know about sooner than they think.

Insurance Basics

Speaking of things that may be happening sooner than they think, it may be a good time to talk about cars and car insurance. Explain to your teen that having a car comes with other expenses than just gas. Insurance is essential to keep them financially sound in case of an accident. And when it comes to insurance, make sure to help them understand deductibles. It’s a concept that will carry over to other types of insurance like health and homeowners.

Understanding Credit

We are bombarded by advertisements about credit cards and building credit. Some credit card companies prey on young adults by sending them multiple offers to open accounts. This happens when they reach legal age because the companies know Mom or Dad is no longer looking over their shoulder. But teens need to be aware of how to review credit card offers, watching for interest rates that are way too high. Some companies offer credit cards to young adults with 30-50% interest rates. While you’re at it, help your teen understand the difference between a credit card and a debit card tied to their bank account.

Help Them Save

Teens need to know how important it is to save some money from every paycheck. No one expects them to have fully-funded emergency savings account within six months. But understanding why it is a good idea will help them in the long run. Stress that money saved is used for true emergencies, like a major car repair, unexpected bills, or when they lose or change jobs. It’s one of the harsher realities of life, but they need to know that just because you have a job one day doesn’t mean you will the next. Or that the best friend they chose to live with never has their share of rent money on time. That’s why saving for emergencies is always a good practice.

Plant a Retirement Seed

We know that teenagers don’t think about retirement. Unless one of their parents is getting to that age, teens are typically worried about finding their first job. But helping your child think about saving for retirement is a good thing early on. Let them know that even a modest amount of money put into retirement savings will grow in time. Retirement is likely the most significant expense they’ll ever save for, so getting started as early as possible will pay big dividends.

Knowing When to Ask for Help

This life lesson reaches beyond finances—helping your teen understand that it is okay to ask for help and when to do that is critical. Young adults will make financial mistakes. Purchasing a little-used app for their smartphone will be minor. Getting behind on car payments is a much bigger mistake. You need to help them know they can turn to you for advice and support when needed.

Peoples State Bank has banking professionals who can answer your questions about finances, opening checking or savings accounts, and help you and your teenager determine their course of action. Contact our customer service center at 888.929.9902 to learn more.

Jackie Hamann
Senior Personal Banking Officer
Jackie is an experienced banker working with personal customers at Peoples State Bank in Marathon. Jackie meets and works with customers to help them with their banking needs.