Having a job will give your teen independence and career experience. There are so many options available to teens, and working helps them build skills for future success. Plus, it makes them money!
Then, they get to spend it! Teenagers are not always the most responsible or forward-thinking people, so you have to guide them in the right direction. Fiscal responsibility is a key factor in adult success. Teach your teens how to manage their funds, and they will benefit for the rest of their lives.
Get Them A Checking Account
Your teenager needs a checking account. The type of account you open depends largely on your bank, but you have options. Most banks will allow you to open savings and checking accounts for teens as young as 14, with an adult as the joint account holder.
Unlike a savings account opened in your name, these teen accounts give them full access to manage, deposit, and withdraw funds. As a joint account holder, you can monitor activity. Many of these accounts will come with a debit card, which are invaluable for things like online purchases and petrol.
If you don’t think your teen is ready for the responsibility of a checking account, you could opt for reloadable cash cards. All the major credit card companies, like Visa and Mastercard, have reloadable options. They are accepted at most stores and online, just like a debit card, but you can’t overdraw funds.
Have Them Pay Bills
They have a job, they have money, they have a debit card… now what? They need to start paying some bills! Teach teenagers financial responsibility by giving them recurring expenses.
Encouraging your teenager to pay for their own car loan, or join a monthly streaming service like Netflix, will force them to be responsible with their paycheck. The higher value the service, the more likely your teenager will pay the bill. Just like a credit card, there is risk involved in making a major purchase or signing a long-term service contract. As their guardian, your name and credit will be at risk. Talk to your teen and make sure that they are ready for the responsibility. Let them know the consequences if they drop the ball.
Rather than driving them to the nearest used car dealer, you could simulate “real world” bills right at home. Sit down with your monthly expenses and figure out your teenager’s share of the family housing, utilities, and food. Have your teenager pay for those “bills” each month, then put the money into a savings account.
In addition to learning about monthly expenses, you’ll be building an emergency fund for your teenager. It requires less risk then a major purchase, but is equally beneficial for your teen.
For this they’ll need consistent income, so usually you can do this once they’re 15 years or older as that’s the age where consistent income typically happens.
Set Financial Goals
You are never too young to start planning for the future; but like anything else, goal-setting is a skill that takes practice. Even before their first paycheck, sit down and ask your teenager some questions. Why do they want a job? What do they want to get out of it? Your child might not have considered what they could do with their money.
Start by setting a fun goal and a meaningful goal. These goals can encompass a range of different priorities, costs, and time-frames. Fun goals are generally more short term, like saving for a new iPad or concert tickets. Meaningful goals should be long term and value based. A meaningful goal might be saving for your first year at university, for holiday travel, or charity. The key is that your teenager decides what is meaningful for them. If they don’t care about the goal, they won’t save for it.
No matter what these goals are, make sure they are achievable!
Write it down, brainstorm key steps to reach it, and create incentives. Maybe you match their savings at each benchmark, or celebrate with a nice dinner. Give them options and ideas to help them save money. Support your teenager in reaching their goals, and be patient when they fail. Financial discipline is hard! It takes time and effort to create good habits.
Make a Realistic Budget
One conversation about financial planning will not make your kid a money genius. We all know how fast that cash goes after payday. Take the time to set up a digital or paper budget with your teenager, then teach them how to balance it each week. This is a great thing to do together, so that your teens see how balancing a budget works for a household.
Start by having your teen create a list of “needs and wants” that cost them money. This should include bills that they will be paying in the future, like a car loan. Get them to do the math. How much of your money do they currently spend, and how much will they be making? These numbers are the basis of their budget.
Teach your teenager the envelope method. For this method, you use cash for food and entertainment, while paying expenses with your debit card. Put the cash in envelope for each week or month, and only take it out when you want to spend it. If there is money in the envelope at the end of the month, put it in savings. It’s a great way to track your money and avoid overspending.
Don’t Bail Them Out!
Kids make mistakes. Kids with money make expensive mistakes. If you take the financial consequences away, you teenager misses out on a valuable lesson.
This is the safest time for your teenager to make financial mistakes, while you can mitigate the consequences. The key is to set your expectations up front and be willing to follow through. When your teen starts managing their own money, set specific boundaries about what is yours and what is theirs. Be honest about your own financial struggles, past or present, and how you deal with them.
Don’t get angry or punish your teens for their money mess-ups. Instead, rely on natural consequences. Let them overdraw their checking account. Make them pay the fines. Do so with love and compassion. The monetary consequences are punishment enough.
Jobs offer teenagers financial independence in many ways, but they need to be taught what to do with their money. Be patient and steady as your teenager navigates new financial challenges. Be open and honest about family finances and let them learn from your mistakes. Above all, encourage them to remember their values. Your guidance in these early stages can be the difference between financial struggle and lifelong success.
Ron Stefanski is the founder of JobsForTeensHQ.com and has a passion for helping teenagers find jobs. He created the website because he feels that teenagers need to focus on their professional passions much earlier in life and aims to teach them how they can do that. When he’s not working on his website, Ron is a college professor and loves to travel the world.