4 Essential Money Management Tips for Teens

Michael Costigan is a 17 – year-old from Orange County, CA. He is a social entrepreneur, public speaker, and truly enjoys helping other’s better understand teen related issues. You can follow him at www.SpeakingofMichael.com

As a teen myself, I can say from first hand experience the joys and pitfalls that money can bring. The habits that teens develop in regards to money are the same ones that will exist in their adult lives. For this reason, money smarts are essential to navigating the adult world as well as the teen world. Money is a leading stressor and cause for personal and family issues – it has the power to bring out the worst in people and cause unbelievable arguments. It would be nice if money weren’t an issue, but especially in these economic times, it’s an ever more apparent issue for most families and individuals. If you’re lucky enough to be in a position where you aren’t struggling, then don’t overlook these points; they can be applied to any financial situation – good or bad. And if you’re looking for financial literacy education, for either your teens or if you’re an educator your students, I strongly encourage you to check out the National Financial Literacy Council for curriculum and other resources.

1 .Parents shouldn’t be money trees — but they should give you money advice.

Parents want to give their children the best, and their kids always seem to expect the best. It’s important that you don’t let your kids fall into the cycle of asking for money and you handing it to them. More important, is setting a system up early on before this pattern can even begin to develop that most closely simulates how the real world works. Kids need to learn the value of money, but they also need to learn how to be considerate of their own, and when they’re empowered to do so because it’s out of their own best interest, they’re more likely to do so. Whether you set up an allowance system or you give your child a specific amount of money once a week or month there should be expectations pre-attached to this money. For example, the money you give themay be for lunch at school and any thing else they want to buy. It’s important that they know ahead of time to allocate the money needed for lunch, kids should be instructed to
budget their own money and to take into account what expenditures they know they will have, versus looking at an allowance as a free sum of money to do what they want with.

2. Whether it’s your allowance or your paycheck or even Birthday money – Save!

This is something I really wish I had started doing when I was younger. In fact, I even wish I did it consistently now. Having an income, whether it be allowance or a job provides a stable stream of money. It’s then what you do with that money that’s so vitally important. If your kids are in their late teens this is even more important, especially if they ere driving and out doing things with friends. Putting away a portion of this money every week or every month will prove to be very useful when unexpected expenses arise, and they do so quite frequently. For example, when I first got a car I underestimated how much maintenance and repair would be – big mistake. I found
myself scrambling to pay money back to my parents after what I thought would be a 150.00 repair turned into a laundry list of repairs. Setting up some sort of percentage per check or of one’s allowance is best; perhaps you will vow to put away 20% each month.

3 .Credit cards are bad news. Debit cards if not used responsibly can be too.

By their very definition credit cards imply spending more money than you have. That’s the very first step to becoming over your head in debt that you either have to pass on to your parents or get into a fight with the bank about. There really isn’t a good use for credit cards unless you’re purchasing something very expensive, are using it to purchase something like a car, or jumpstarting a new business. I would recommend staying away from them at all costs. They seem great on the surface, you have twenty- dollars, and the item you want to buy is thirty. Perfect, I’ll just put it on my card and I have the next money to find/earn/somehow obtain…the rest of the money! That is until you calculate interest and the overall balance of the card. Soon your bill will be for fifty dollars and that initial luxury of being able to buy what you want at any moment won’t seem even half as attractive as before. Debit cards are at least better in the sense that
you’re actually spending your money, but avoid getting into a situation where there is a parent on the other end making weekly bank transfers for over drafted accounts. A checking account and debit card is a good idea though for older teens and they should utilize it to their experiential advantage – being able to manage their own bank account online and setting up savings plans, maybe even a little investing!

4. Really consider getting a job.

Everyone says this – get a job. So it’s no surprise I’m saying it. I will say however, that the benefits of having a job are so many more in number than simply the money you will earn. For teens a job can be the first dip into the adult world and actual reality. Two extremely important responsibility impositions. Jobs are invaluable for teaching teens the value of money. If the opportunity and ability is there, it is highly recommended that teens get work experience before going off to college. It will teach them the valuable lessons they will need when living away, and it will prepare them so that any mistakes made happen before they’re off on their own where the consequences can be more severe.

Spend frugally, save extravagantly!

3 thoughts on “4 Essential Money Management Tips for Teens”

  1. Hi Michael,

    What a wonderful post from a teen’s perspective, this is truly awesome! ;o)

    I’m a homeschooling mom who also helps parents teach their children about money and what you say in your blog here really resonates with how I believe.

    I wholehearted agree with your first statement:

    1 .Parents shouldn’t be money trees — but they should give you money advice.

    I always encourage parents to sit down with their kids or teens and find out what their goals are and then find ways they can earn their own money through getting a job, or creating a kid or teen business from their natural passions and talents. What you say is very much like the old adage that it’s better to teach someone how to fish for life rather than just give them fish for a day.

    In your second point:

    2. Whether it’s your allowance or your paycheck or even Birthday money – Save!

    you really cover an incredibly important life skill that is so deeply lacking from our current society. I like to encourage kids and teens to save for different purposes so they have a goal attached to each savings.

    These are the savings that I highly recommend:

    1. Save for Growing: put money away to use to help your money grow. This is the Investing savings account, the money they can use to make more money through, business ventures, real estate, stocks/stock options, etc. The point for this one is to have their money working hard for them so they won’t always have to work hard for their money.

    2. Save for Giving: put some money aside to give back to society, to charity, to make a difference in the lives of others. And this should be something linked to what they personally love so they get the benefit of really feeling connected to the causes they are supporting whether it be for people, animals, our planet, whatever.

    3. Save for that Rainy Day, that day we all have in our lives when our world turns completely upside down. In our current economy we can see this happening all around us. How many of us parents wish we would have started our own Rainy Day savings account so it would be there for us right now to help us out of our financial disasters? This is an account you never touch, this is just for SERIOUS EMERGENCIES ONLY!

    4. Save for Learning: put some money aside for their future so that whenever they want to learn something new they have that money there for them to use. So many people today change their jobs and want to try new things, wouldn’t it be nice to have a savings account set up just for that so they never have to feel ‘stuck’ in their financial lives?

    5. Save for a Special Goal: Have your child really have a REASON to want to take care of their money habits, something to strive towards, like a new car, or a special vacation. Something big that they have to have the perseverance to continue to go after. Something that REALLY means something to them personally.

    6. And then have some fun with the rest: Allow yourself to have a little bit of immediate satisfaction so you’ll see an immediate benefit for your hard work and then you’ll be more motivated to continue with all your hard work.

    Michael, I do have a different perspective on Credit Cards than you do but I think you’ll appreciate my thoughts on this. Like you I too believe that teens shouldn’t be just given access to a credit card which seems like a never ending supply of magical funds. This is why so many people are in such great financial crisis today!

    Instead, what I recommend is to set up a credit card that is on a ‘pay as you go’ basis. In other words, your child needs to put the money on the card FIRST BEFORE they can spend it. And that way what ever money they’ve spend was already paid for.

    A sort of ‘pre-paid’ credit card.

    So why do I recommend this? Mainly because using a credit card is a great way to build up your credit score, and building up your credit score allows you wonderful opportunities to allow your money to work hard for you, for example in getting a mortgage on a rental real estate deal.

    Plus it also sets up the habit to always make sure you have enough money to pay off your credit card for once they become adults and don’t fall into the habit of thinking it’s FREE money and then end up needing to file bankruptcy before they even turn 25 years old like so many of our youth are having to do today.

    And I love your 4th tip Michael:

    4. Really consider getting a job.

    But I’d like them to consider also starting their own businesses, being in complete control of their financial futures. Getting a job is great for immediate money, and learning about how to work with people, but creating your own business lets you set the pay rate and the pace. You can achieve real financial freedom if you’re the one in charge of deciding how much you are worth! ;o)

    Thanks so much Michael for your fabulous post, what an awesome teen you are!!!

    Cheers…Amanda van der Gulik…Excited Life Enthusiast! ;o)

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