How many times have you heard somebody say that they wish they had learned about money earlier? Maybe you’ve even said the phrase yourself. Wished you had a better financial education from the start so you could avoid some of the hefty mistakes that we can pay for well into our adult life.
Well, you cannot go back in time, but you can make sure the teenagers in your life learn these lessons early on – and get to avoid the costly pitfalls. This might not feel like the most exciting subject to a teenager, but it might just be the best gift you can give them.
By getting their finances off to a great start they can benefit from things such as budgeting skills, larger savings, fewer debts, and compound interest. And just by having a thorough financial education, they’ll be more equipped to avoid common money mistakes and make smarter financial choices.
These are the ten best ways to guide teens about money in 2022.
1. Give them a monthly allowance
One of the first things you can do to help your teenagers learn about money is to give them a monthly allowance. That means instead of them coming to the bank of mom and dad every time they need something, they get a monthly amount to budget themselves and decide what is a priority or not.
It’s up to you whether you want to equate this monthly allowance to specific chores around the house, or to rules such as “going to their violin lessons’ or “getting B’s and above at school’, for example. If your teenager struggles with motivation then adding a financial reward can be a good way to incentivize them, and teach them how good it feels to earn your own money.
Alternatively, the concept of an allowance can also just be an agreed monthly payment, that usually increases with age.
2. Encourage them to get a part-time job or side hustle
One of the greatest money lessons you can give a teenager is the skill of discipline and hard work. By having this ingrained from a young age, they’ll naturally grow a better appreciation and understanding of money than somebody who doesn’t start working until much later in life.
Having a part-time job, whether that’s after school, on the weekends, or during the school holidays, also teaches valuable social skills and can grow them as an individual.
Popular part-time jobs for teens
The responsibility and grind that comes with a part-time job will quickly be rewarded when your teenagers start earning their very own income. However small, having your own money is an exciting time and for teenagers with little costs, this can vastly improve their quality of life.
- Delivering newspapers
- Fast food server
Side hustle ideas for teenagers
The teenage years are the perfect time to start a side hustle because you have free time and no responsibilities. Without the fear of failure hanging over your teenagers, they can afford to spend time experimenting and trying out what side hustles they enjoy most before they have bills to consider.
They’ll also learn valuable entrepreneurial skills, and if they do well could create the beginnings of a business to continue in years to come.
- Tutoring other children at their school
- Creating a blog or Youtube channel
- Teaching languages online
- Selling physical products
- Digital products online with unique selling proposition
3. Guide them about budgets
One of the first financial lessons you need to guide your teen is how to budget. No amount of money earned makes up for a lack of budgeting, because until one has control of where their money goes it can leave as quickly as it came. As John Maxwell said, “A budget is telling your money where to go, instead of wondering where it went.”
For this reason, budgeting is something your teen needs to understand before they go off into the world and start making their own money. Ideally, you would start teaching them about budgets during childhood with their allowance or money they’re gifted. Teaching them simple lessons of prioritization, and when they get to the store to spend their money making sure they stick to the agreed budget and not caving and topping up their funds for them when it comes down to it.
If your child doesn’t have money of their own yet, you can try getting them involved with the family budget. Not only will this give them a greater appreciation for the things they have, but it’ll prepare them for the day they need to budget for their only family.
4. Play games that involve financial strategy
One of the most fun ways to introduce your teenager to the world of finance is to play games that involve financial strategy. Learning is easier and less intimidating when there’s an element of play involved, and even particularly reluctant teens won’t be able to resist getting involved.
Games that teach money lessons
- Pay Day
- The Allowance Game
- The Game of Life
- The Stock Exchange Game
5. Explain taxes
Many of us didn’t learn about taxes until we left school and started working. Or in some cases, not even then. Poor education around tax can result in missed payments, painful fines, bad credit scores, and a lot of headaches. So teaching your teen about taxes earlier rather than later is definitely not a bad idea.
One of the first things you can teach your teens is why taxes exist in the first place. Explain how taxes benefit us in our everyday lives and make the world a safer, fairer place. By drumming this in from an early age, you can make sure your teen is responsible with their taxpaying and feels proud of the contributions they can make to society instead of resentful.
Make sure your teens know that tax is not optional, despite what they might see online.
6. Give them a bank account
Putting away the piggybank and getting a bank account is an exciting moment in anyone’s life and will make your teen feel very grown-up and responsible. The more you can involve them in the process of choosing a bank and account type, the better.
Many banks offer sign-up incentives and other benefits, such as cashback on purchases. Teaching your teens how to make the most of these from an early age will result in savvy spenders later on.
By using online banking, your teens will improve their financial literacy and be better prepared for when they don’t have you around to help. Take some time to go through their bank of choices app with them, explaining how to read a statement, set up direct debits, and make payments. This will give them a chance to ask questions and you can test them on the different features.
Warning: with money-making scams more prevalent than ever, this is a good time to give your teen a talk about online safety and not transferring money without your permission. If you have any concerns about this, consider agreeing to shared access of your teen’s online banking to make sure they’re not in any danger.
7. Explain how investing works
You will rarely meet a person who doesn’t wish they began investing earlier. Making your money work for you is an exciting prospect, even to an unassuming teen, but many are too intimidated to start until much later in life- Says Stefan F. Dieffenbacher, Founder of Digital Leadership
Encouraging your teen to start investing a portion of their income (whether that comes from a part-time job, business, allowance, or gifts) is a great way to set them up for success in the future.
Because investing comes with a risk, teens should be given a thorough introduction to the world of investing before they commit to any serious amount of money. Teens may be more susceptible to un fact-checked social media posts and what their friends tell them which can cause problems when you team that with the impulsivity and lack of financial education many young people have. So, this is your opportunity (and responsibility) to ensure your teens know exactly what they’re getting into and understand all the possibilities beforehand.
Investing topics to discuss with teenagers
- Compound interest. Make sure your teenagers understand compound interest and how beneficial it could be to them to start their investing journey early.
- Diversification. Let your teenager know about all the different ways they can invest their money and how to create a diverse portfolio to balance the risk.
- Patience. Explain the concept of “buy and hold’ and make teenagers aware that there is no such thing as a quick buck when it comes to investing.
8. Consume financial education resources together
If you don’t feel like you have all the answers to share with your teenagers, then try consuming financial content together. This could be as simple as listening to finance podcasts in the car or scrolling through money tips on Tiktok together, and it can be a great way to introduce new topics to discuss and research further.
Teenagers don’t like to feel like they’re being lectured to, so finding a way to make it entertaining or using up dead time is a great way to inspire them to learn more in a fun, less formal way.
By making the most of all the great financial resources out there you’re also introducing a wider range of financial advice and insights than any one person could possibly give. A well-rounded financial education needs to come from varied sources and people from different backgrounds and walks of life.
Free financial content to consume with your teenager
- The Financial Diet
- The Ramsey Show
- Millennial Investing
- Afford Anything
- Girls That Invest
- The Diary of a CEO
- You Need a Budget
- Simple Money
- Save Live Thrive
- The Broken Wallet
- The Break Platform
9. Teach them about debt
You cannot teach your teenager about money without giving them an education on debt. Whether your family deals with debt or not, it’s important that your teenagers understand the role debt has in society and how this affects people.
Instead of demonizing all debt and making teenagers feel like this is something to be feared (because this will result in feelings of shame and hiding debt in the future) you can educate them on the different types, the ways it can be utilized, and the types to avoid.
Debt topics to discuss with teenagers
- Credit card debt. At the same time, you can teach your teenager about credit scores and the effects this has on their future financial choices.
- Student loans. If it’s likely your teenager will have to take on a student loan to attend college, make sure they’re aware of how this might affect their future as well as variants that could lower this impact, such as community college and scholarships.
- Car payments. Many teenagers want to get a car as soon as possible, but make sure they understand the difference between owning a car outright and leasing one – and which option might be best for them.
- Debt repayment strategies. While you might not want to imagine a world where your teenager is struggling to get out of debt, it’s important to be realistic and prepare them for ways to repay any debt they incur as responsibly as possible.
- Mortgage. The one kind of debt that most people can expect to have in their lifetime. The sooner you can teach young people about mortgages and the house buying process, the sooner they can start making the right steps towards this.
- Interest. Make sure to teach your teenagers how interest varies from debt to debt, so they can spot those sneaky high-interest repayments that can cause a vicious cycle to incur.
10. Watch financial tv shows together
If your teenager starts yawning whenever you bring up money management strategies, you may need to meet them somewhere in the middle. Start small by suggesting TV shows you can watch together that are entertaining and involve money lessons. This way they’ll still be learning but feel less intimidated because they’ll be in the comfort of their living room.
You can use the time afterward to initiate wider conversations around the topics mentioned, let them ask any questions, and use this as an ice-breaking technique.
TV shows and films that teach money lessons
- Shark Tank
- The Apprentice
- The Wolf of Wall Street
- The Profit
- The Pursuit of Happyness
- Dirty Money
Bonus Tip- Discuss retirement options
Your teen probably doesn’t spend much time thinking about retirement, especially if they haven’t entered the world of work just yet. However, you can never start too early with these things, and getting a good understanding of their retirement options will help them make choices now that their future selves will be very grateful for.
If your teen struggles to grasp the concept of retirement then you could draw upon some examples of retirees in their lives, like grandparents and great grandparents.
The retirement options you’ll discuss with your teen will depend on what country you live in, so we won’t deep dive into this here, but you might want to chat about the following:
- What retirement is and why do people need money for their old age
- The age people tend to retire, and the concept of FIRE (financial independence retire early)
- How much money they might need to have a good quality of life in retirement
- The importance of compound interest and getting started early
- Company benefits and advantageous pension schemes to look out for
- Saving for retirement as a self-employed person
- What is a 401k and the tax benefits that come with it
I hope you found these eleven strategies to guide teens about money helpful. You have an incredibly important opportunity to make a difference in somebody’s life by giving them these insights, and they’ll one day be very grateful that you took the time to impart this knowledge to them.
At the same time, it’s okay not to be a complete financial expert. Be honest with teenagers about what you do and don’t know, and don’t be afraid to share your mistakes with them. They’ll appreciate your honesty and vulnerability, and understand that it’s how we rectify our financial mistakes that matter most.
Teaching teenagers about money is also a great way to brush up on your own financial education, assess the choices you’re making, and be the best role model that you can be.