A Parent's Guide to Teaching Money Management

Teaching teenagers how to manage money is one of the most important — and often overlooked — lessons a parent can provide. The earlier these conversations begin, the better equipped teens are to handle the financial responsibilities that come with adulthood.

According to the Education Data Initiative, Gen Z currently makes up 35.2% of all student loan borrowers in the country, and 84% of Gen Z with student loan debt have delayed major financial investments, such as buying a home or starting a business.

Instilling good money habits now can help your teen avoid debt and the financial consequences of prior decisions. Here is a guide to help you set your teen up for financial success and get that conversation started.

Conversations to Have With Your Teen

According to Bank of America Private Bank, age 13 is an appropriate time to begin having more in-depth conversations about money management. These conversations do not need to happen at once. Instead, they can be an ongoing dialogue that builds over time off of everyday moments and questions.

Some topics to discuss include:

What everyday expenses look like, such as groceries, gas and utilities, and why needs should come before wants when budgeting
How financial decisions are made, including how to compare prices, make thoughtful purchases and successfully save
What debt means and how it can lead to higher future expenses

Creating a judgment-free and honest space for your teen to ask questions about money is key. According to Bank of America Private Bank, the goal is to open the door to deeper, ongoing discussions that effectively share your family’s values around finances.

Opening a Checking and Savings Account

One of the most effective ways to teach teens about money is to give them hands-on experience managing it themselves. According to Navy Federal Credit Union, when a teen opens a savings account, they can learn how to keep their money secure and earn interest. A checking account offers the opportunity for them to gain real practice with a debit card, everyday transactions and tracking their spending.

After you have guided your teen in opening a bank account, show them their monthly statement. As stated by Empeople Credit Union, when a teen watches their savings account grow, it can motivate them to contribute more consistently over time.

The 50/30/20 Rule

The 50/30/20 rule is a simple budgeting method that works well for just about anyone, especially teens who are getting started.

According to Navy Federal Credit Union, the breakdown is: 50% of income goes toward needs, 30% toward wants and 20% into savings. For a teen earning $250 a month, that means $125 for necessities like gas or lunch, $75 for entertainment and fun and $50 set aside in savings.

This method helps teens strengthen awareness of where their money goes and begin making more intentional choices about how they spend it.

Basic Money Management Tips

Here is a list of basic money management tips to help get your teen started.

Create short-term and long-term savings goals, such as one month and one year.
Follow the 24-hour rule: Before purchasing anything over $20, wait a full day to determine whether it is a want or a need.
Allow teens to experience the consequences of overspending. This includes having to cut back spending one month if the budget was exceeded the prior month.
Discuss the meaning and long-term significance of credit. According to Empeople Credit Union, many young adults have little to no credit history, which can later affect their ability to rent an apartment, finance a car or be approved for a loan.
Consider opening a joint account with your teen to monitor their spending and guide them through financial decisions along the way.
If your teen depends on you for all financial matters, consider depositing a set amount into their bank account each month, rather than handing them cash or sending them money digitally throughout the week. Then discuss with your teen how you expect the account to be used — entertainment, lunch food, gas, shampoo, etc.

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