Teaching kids about money is something that can affect them for the rest of their lives. If you’re a parent, then you may want some guidance about how to teach your teens a valuable lesson about money management.
At Addition Financial, we talk to parents every day about teens and money. We offer products that are specifically tailored to teenagers. So with that in mind, here’s our general advice about teens and money plus 5 tools to help them with financial responsibility and good money habits.
Let’s start by reviewing why financial education is essential for teenagers. Saving money is something that a lot of parents teach their kids from an early age, and you might have given them an allowance or spent some time explaining basic financial concepts.
As a young adult, your teenager is now on the brink of independence, and teenagers need more detailed information and practical advice. After graduation, many will go on to college. Others may learn a trade or even go right into working a full-time job. Providing them with money skills will help them with spending, borrowing, saving and repaying student loans.
Setting your kids up with a bank account of their own is key to helping them learn. Addition Financial has a Student Checking Account that comes with a debit card and a host of other features. Younger kids can even get a Youth Savings Account with built-in incentives to save money. You’ll be preparing your teen for financial success by giving them the money knowledge they need to grow into adulthood.
Teen money management lessons should start with budgeting. We believe that everybody at every income level should have a budget because it helps them learn how to allocate their money responsibly. Even a kid with one chore a week and a piggy bank can be encouraged to budget their money.
Parents can help teens develop a budget by sitting down with them and, if they’re comfortable doing so, showing them the family budget as an example. Family finance is the first building block of showing kids how to manage their money. We like the zero budgeting method, which would require your teen to account for every penny they earn and spend. Keep in mind that teens who work part-time may need to keep their budgeting flexible if their hours vary from week to week.
One piece of budgeting advice for students is to set a couple of financial goals as they create their budget. For example, they might want to set aside money for college expenses or buy a car. Goals can help to incentivize teenagers to stick to their budgets.
In What Ways Can a Part-Time Job Benefit a Teenager’s Understanding of Money?
For a lot of teenagers, having a part-time job is their first taste of financial independence. When kids are fully reliant on their parents for their needs, they may never make a significant financial decision beyond how to spend their allowance. Once they have a job of their own, they’ll be in a position to make money decisions every day.
With a part-time job comes responsibility on multiple levels. If your teen gets a part-time job, it’s the perfect opportunity to talk to them about how to manage their money. For example, they may have the option to get their paycheck deposited directly into their bank account. They may have to file taxes, and they may have their first debit or credit card. We suggest sitting down with your teen to review their first paycheck, making sure they understand what they’re earning on a net basis and how much is being withheld for taxes.
You may walk your teen through the process of creating a budget, prioritizing savings and other important financial concepts. From there, you can encourage them to ask questions about things like automating savings, compound interest, investing and more.
One of the best things about having kids in our digital era is that they have a huge array of money management tools to choose from. Think of any financial goal or task and there’s an app that can help your teen get it done. With that in mind, here are 5 of our favorite money management tools for teens. We’ve made sure to include apps for budgeting, saving, investing and more.
YNAB is a budgeting app that uses the zero budgeting method. As we noted above, zero budgeting means that you’ll account for every penny you earn, whether you spent it, saved it or invested it.
With YNAB, you can create a budget, track your spending, and build wealth by tracking your investments. YNAB users can connect the app to their credit union or bank and fully integrate all Apple transactions, too.
One potential downside of YNAB is that it’s a paid app. If you pay annually, the cost is $99. If you opt for monthly payments, you’ll pay nearly twice as much at $14.99 per month. One thing that can help to defray the expense is that you can share your single subscription with up to six friends or family members.
Goodbudget is a freemium app with a solid free plan and a low-cost subscription option. Unlike YNAB, it uses the envelope method of budgeting. You can log in online and use their cloud-based option or use the mobile app. Either way, your budget and spending will sync, so you’ll have up-do-date information wherever you log in.
The free option comes with tons of features that may be enough for teens and college students. The premium option costs $10 per month or $80 if you choose to pay annually in advance.
Acorns is an app that helps people of all ages with saving and investing their money. They offer an array of investment options, including their Early option that’s specifically for kids. You can use their automated investing to buy and sell an array of investment vehicles including cryptocurrency. They offer a wide array of financial education content on their website including articles, videos and tips.
Acorns is a premium app. There are three pricing tiers. Acorns Personal is $3 per month, Acorns Personal Plus costs $5 per month, and Acorns Premium is $9 per month plus you’ll get a free month when you sign up. Users at all tiers can take advantage of perks like Round-Up Investing, where you use the spare change from other transactions to grow your portfolio.
Rocket Money is a comprehensive money app that’s been getting a lot of attention for some unique features. You can use it to create a budget, track your spending and automate savings. You can also ask Rocket Money to renegotiate bills and cancel unwanted subscriptions. We love those last two features because they can actually save you money!
You can get Rocket Money’s basic features with their free account. Upgrading to the premium version will allow you to take advantage of bill negotiation and subscription cancellations. You’ll get a 7-day free trial. After that, the cost will be about $4 per month if you opt to pay annually and up to $12 per month if you decide you prefer a monthly billing cycle.
Wally bills itself as the first personal finance app powered by artificial intelligence. Using ChatGPT, Wally can help you identify spending patterns, create a budget and more. It’s set up to sync with more than 15,000 financial institutions worldwide. Wally has been honored with several impressive awards from authorities such as PC World, Investopedia and Apple.
Best of all, Wally is a totally free app. There’s no premium option, so you won’t be missing out on Wally’s best features. The feature that we like most is WallyGPT, the AI-powered financial assistant. You can use WallyGPT to figure out how much to save each month to meet a big goal. Wally is available for both Apple and Android devices.
One of the most important things for you to know as a parent is that your teenager’s financial education is ongoing. You can start by explaining basic concepts and providing your teen with resources. The single most important thing you can do is to encourage your teenager to come to you with questions and to seek out financial resources to educate themselves.
Are you looking for a financial institution that prioritizes money management and cares about your teen’s financial education as much as you do? Addition Financial is here to help! Click here to read about our student accounts and apply today.