by Emily Hechler 
One of the joys of raising your kids is watching their understanding of the world grow. This is all fun and games until suddenly your teens think they know everything about money. Many teens fall into the trap of spending most of the money they have simply because they have enough money to buy something they want. Teenagers are only a few short years from being financially independent from you. Regardless of whether your teen really does know a lot about money or not, there is likely something they haven’t considered simply because they’re inexperienced. In this guide, we have tips for you teaching your teens about saving money, spending money, and sharing money wisely.
Teen Money Management
Teaching money management to teens is essential for them to use their money wisely. As they get older, their desires to make purchases will only grow because of the expensive and appealing experiences they can buy. The best way for a teen to learn to manage money is by having real money to manage. When they were kids, using play money or playing games was appropriate, but teens learn better through trial and error. Here are some methods to help teach your teens about money management.
Open Checking and Savings accounts at Alltru. Our StepOne Teen Checking and Savings accounts were created with teenagers in mind. Teens only need $1 to open an account, plus their parent or legal guardian. Teen accounts can be easily managed with digital banking too.
Work a part-time job. Many employers hire 15- and 16-year-olds. Since they are minors, there are limitations to the kinds of jobs and the hours they can work. However, if your teen has a job, then they can start earning their own money to use how they please – with some guidance. Money that is earned seems to have more value than money that is given. That’s true for teens too.
Encourage responsibility in your teens. Instead of giving them $20 here and there for gas and nights out with friends, make them earn it. Essentially, you’re giving them an allowance in exchange for chores. 60% of teens get an allowance from their parents. This could even encourage them to get a part-time job to earn even more.
Make a budget. Great money management starts with making a budget. Even though your teens have limited expenses while still living in your house, they can practice the basics to prepare for when they start college, get a full-time job, or move out. Start by spending, saving, and sharing, making sure to include money in each for an intro to a well-rounded budget.
Demonstrate paying your bills. Show your teens how you manage your budget to pay your bills. Log in to digital banking or drop a check in the mail – whatever method you prefer. Later, log in to Alltru’s digital banking together to confirm that the payment went through successfully. If you’d rather not share details like your mortgage or credit card payments, you can use smaller bills, such as an electric or cell phone bill, to illustrate the process.
Teach them about insurance. Car insurance, home insurance, renter’s insurance, health insurance, and other types are all necessities to avoid major bills when an unexpected situation arises. As parents, we don’t make our kids pay for their own insurance since they have no way to earn money. After your teen gets a part-time job, teach them how insurance works and have them contribute. They could pay for a percentage of their monthly cost, all of it, or the increase after their rates go up due to an accident. The need for insurance doesn’t disappear when they are on their own. By starting them off with one payment, they can learn how to manage their money wisely and be equipped for when they have several types of insurance to pay for in the future.
Why Your Teen Needs a Checking Account
Checking accounts, also known as spending accounts, allow the owner to do just that – spend the money sitting in the account. When teens have their own checking account, they have access to spending their own money with ease. We encourage you to have a conversation with your teen about being responsible with their money before opening the account so neither of you have to pay for overdraft fees. Check out these reasons why your teens need a checking account.
Your teenager will get a debit card. Your teenager will receive a debit card, so there’s no need to worry about them grabbing enough cash before heading out. They can use their debit card for purchases, including online transactions, without needing to borrow your card and repay you later. With a debit card, funds are deducted directly from their account almost immediately.
Your teens’ money has a designated account. When your teens open their own checking account, you don’t need to worry about their money getting mixed into yours on accident, or vice versa. Plus, when your teen begins their first job, they can use their Checking account for direct deposit. This prevents them potentially losing the money they cashed in from a paycheck or forgetting to deposit a paycheck altogether.
Your teens can start building a strong financial foundation. As teens learn to manage their money with a checking account, they may might make a few mistakes, but these won’t affect their credit score, as a checking account alone doesn’t establish credit. However, when they apply for loans in the future, lenders may review their bank account history. A well-managed account can give them a valuable advantage!
Your teenager has upcoming expenses. As your teen enters their later years of high school, big life changes come quickly. Whether they are preparing to move out or head to college, building strong money management skills with a checking account will set them up to manage their expenses confidently. For those planning to attend college, the amount of money in their checking and savings account can also impact their eligibility to receive federal student aid. The FAFSA form considers both your finances and your teen’s separate accounts, assuming that you claimed them on your taxes the previous year.
Teen Savings Account Benefits
Similar to a checking account, Alltru’s StepOne Teen Savings account is a designated place for your teenager to keep the money they want to save. There are several benefits to opening a Savings account with your teen, besides just having a designated place for their savings.
Learning how to save money goes hand in hand with learning how to budget. While it’s essential for your teens to set aside some saving as they create their first budget, it’s often easier said than done. These tips can help your teens learn the importance of saving their money and practical ways to make it happen.
First, open a Savings account at Alltru. Just like our StepOne Checking account, our StepOne Savings account has a minimum of $1 to open, plus a legal guardian or parent. This account has a great APY, or Annual Percentage Yield, so their money will grow while it sits in the account. It’s a win-win situation!
Avoid impulsive purchases. Even though your teens have money in their budget to buy something, it doesn’t mean they should buy something. Creating a habit of impulsive shopping can quickly lead to unnecessary purchases that later lead to not having enough money for important purchases. Encourage your teens to contemplate a purchase for a few days before buying it. This is easier for them to follow if you avoid impulse buys too.
Create savings goals. If you know of an upcoming expense your teenager needs to pay for, creating a savings goal can help them stay on track to have enough money saved to cover the expense. A savings goal can be a certain dollar amount each month that will add up to the total amount needed to make the purchase four months from now. If your teen has a Checking account with us, they can set up automatic transfers to their Savings account to make the process even easier.
Encourage saving a percentage. If your teens don’t have any upcoming expenses, they might see savings as unimportant since they can buy what they want with their paycheck. Unfortunately, this is not as realistic when they live on their own. By building savings now, they’ll be better prepared for future needs and unexpected expenses. A simple way to start is by saving a set percentage of any income or allowance, and they can even set up automatic transfers to make saving effortless.
Conclusion
The habits developed during the teenage years majorly affect behaviors in early adulthood. This can be positive or negative. Helping your teens establish great financial management skills so they know how to spend, save, and share wisely will reap great benefits for them in the future.
When you and your teens are ready to take the next steps and open their StepOne Checking and Savings accounts, visit a local branch to start.
