Financial Literacy for Teens: The Parent’s Guide to Raising Money-Smart Teenagers

Financial Literacy for Teens: The Parent’s Guide to Raising Money-Smart Teenagers

As parents, we strive to prepare our teenagers for adulthood. A key part of this is instilling strong financial literacy for teens from a young age. When teens gain money management skills through financial literacy for teens, it sets them up for financial independence and security well into the future.

But where do you start when it comes to teaching money management for teens?

The fact is, most teens are very tuned into trends and care a lot about their image and what version of themselves they portray to the world. They are also highly swayed by social media and influencer culture pushing expensive material items. At this point, it is important not to judge their wishes, but rather use them as teaching moments about making smart money choices.

As much as parents want to protect their children, equipping them with strong financial literacy gives them confidence and skills to manage their money wisely long after leaving the nest. Making money talks engaging, relevant, and non-judgmental is super important, so they feel empowered. Though not always easy, it’s one of the greatest gifts a parent can give.

Our comprehensive guide will provide everything you need to cover the key topics, have engaging money conversations, and make learning about finances fun through real-world practice.

Follow our tips on allowances, budgeting, saving, and much more. With your guidance, your teens will gain the knowledge and skills to become truly financially savvy young adults.

Let’s get started!

Why Financial Literacy for Teens?

Teaching strong money management skills to children provides lifelong benefits beyond just being savvy consumers. Learning about finances at a young age can:

  • Teach responsibility and independence – Hands-on learning by earning, budgeting and saving helps exercise maturity with money through financial literacy for teens. They can gain confidence managing their own finances.
  • Encourage wise decisions – With financial literacy, children consider long-term impact, not just instant gratification when spending. This leads to wiser choices in the long run.
  • Build security for the future – Understanding concepts like investing, credit, and interest allows teens to prepare for financial health as adults. Forming these great money habits early on in their lives will have an enormous effect later on when making bigger financial decisions.
  • Bring family closer – Open conversations about family budgets, expenses and financial goals unite teens and parents around shared values. Seeing how their family deal with big financial decisions, budgeting for the month and adding to a savings pot each month can all spark interest and encourage them to come to you for advice.

How to Approach Financial Conversations

1. Lay the Groundwork with Open Conversations

Before diving into pounds and dollars, first create an open environment for learning and discussing finances in your home. Explain your family’s values, priorities, and challenges around money. Share your experiences, money mindset and even what you wish you’d been taught as a teen about money.

This helps teens feel invested and empowered to take ownership of their financial futures. They’ll know it’s a safe space to ask questions as they’re learning.

Here are conversation starters to break the ice:

  • What did you learn about money growing up? What do you wish you’d known more about?
  • How do our family’s values influence our financial decisions?
  • What are our short and long term money goals? Why are these important?
  • How do you make smart spending vs. saving choices? Share examples.
  • What proportion of our household income do we spend on needs, spend on wants and save or invest? Do we follow the best practice 50/30/20 (Needs/Wants/Save) ratio?

2. Set Clear Expectations around Earning and Allowances

In the tween and early teen years, set age-appropriate expectations around earning money and allowances.

Explain that they can earn extra income and allowances for meeting responsibilities and pitching in around the house. Tie increased freedoms and funds to demonstrated maturity.

Some earning ideas that teach valuable skills:

  • Doing dishes or laundry for the family
  • Mowing the lawn or pulling weeds
  • Caring for pets or younger siblings
  • Running errands for parents

At around age 11-12, consider giving a monthly allowance not tied to chores. This teaches them to budget discretionary funds. Start small and increase the amount as they demonstrate wise money management.

Link larger clothing and technology purchases to saving from allowance money. This incentivizes budgeting and saving discipline and teaches delayed gratification. 

3. Open Their First Bank Account

Around ages 11-12, help your child open their first solo bank account. This allows hands-on experience with adult banking activities like:

  • Monitoring balances and transactions
  • Using a debit card and online/mobile banking
  • Cashing checks and transferring funds
  • Understanding statements and fees
  • Visiting a physical bank and interacting with staff using financial language

Use comparison sites to compare youth and student accounts from top banks like Barclays, Lloyds, and NatWest. Look for budgeting help and financial tips tailored for teens.

Let your teen participate in choosing their account. This gives them ownership and gets them engaged.

4. Guide Creating Their First Budget

Learning to budget is a cornerstone of financial literacy for teens. Work with them to create their first budget.

Have them track income from allowance, gifts, jobs, etc. and expenses over 2-3 months. Track spending categories like:

  • Mobile phone bills and extra apps/downloads
  • Entertainment and streaming services like movies, music, or video games
  • Clothing and other shopping purchases
  • Public transportation costs
  • Restaurants, cafes, or takeout with friends

Then help them organize spending info into a monthly budget:

  • Total expected income
  • Savings/Investment goals (10% is a good baseline)
  • Fixed costs like mobile top-ups
  • Variable spending categories with limits
  • Identification of low-priority “wants” that can be cut

Review their budget together monthly and re-calibrate as needed. Guide them through any overspending issues positively. The goal is learning, not punishment.

Check out our downloadable digital kids budget tracker from our Etsy store!

5. Make Saving a Priority From the Start

Financial literacy for teens will teach them how to responsibly manage their money.

One of the most valuable lessons is consistently saving a portion of any money earned. Explain the power of “paying yourself first” before spending on wants.

Have them open a high interest savings account to stash cash gifts, allowance, and job earnings for goals like university, travel, or moving out.

Even saving 10-15% teaches good lifelong habits. Consider offering incentives by matching their savings contributions.

Once they’ve built savings, educate them on investing basics. Explain your own investment strategies and compound growth (where the interest you earn on savings, earns interest itself too, creating a snowballing effect!). Have them invest a small amount into a diversified fund.

6. Caution About the Risks of Debt

As teens gain financial freedom, they need to understand the burdens of debt avoidance.

Explain why non-essential loans and credit cards can be dangerous. High interest quickly creates excessive repayment. Share tips to avoid predatory lending tactics and loan sharks.

If you add them as an authorized user on your credit card, set firm spending limits and oversight. Make sure they understand implications before using cards.

Also have them check their credit reports so they appreciate the importance of responsible credit use. Maintaining excellent credit saves thousands long-term.

Using credit isn’t all bad – it’s actually very helpful later in life for them! Your teens just need to know how to use it responsibly.

7. Share Budget-Savvy Real-World Tips

In addition to big-picture concepts, teens need plenty of practical money tips for everyday life.

Here are some budget-friendly ideas you can share:

  • Take advantage of student discounts at retailers, events, and transit
  • Cook meals at home and limit takeout/restaurant meals
  • Set a sensible limit for discretionary purchases each month
  • Buy generic brands and shop sales to save on household items
  • Compare “price per g/kg” on store price labels to calculate which products are most cost-effective
  • Review bank and credit statements regularly to catch errors
  • Beware of “subscription creep” – review monthly app, music, and service fees
  • Apply early for all possible grants, scholarships, bursaries, and work-study programs available to you

8. Make Discussions Relatable With Real-Life Examples

Financial literacy for teens is an important life skill that sets them up for success in the future.

Use personal examples to connect financial topics to real-world situations your teens will soon face:

  • Share experiences making tough spending tradeoffs.
  • Explain your thought process when faced with an unexpected home repair bill
  • Discuss how you choose the right mobile phone plan based on usage and needs

9. Make It a Family Activity

Get the whole family involved in money conversations and activities with your teen. This brings concepts to life.

  • Hold regular money-themed family meetings to discuss goals, challenges, and decisions
  • Do price comparison “challenges” at grocery stores and retailers
  • Involve teens in charitable giving by having them research causes to support
  • Have teens “consult” on financial decisions like comparing insurance options
  • Ask teens to calculate costs for an upcoming family activity or trip

Make Learning about Money a Habit for Teens

Consistency when teaching financial lessons pays off by ingraining smart money habits over time. Here are some tips to make financial literacy part of your family routine:

  • Discuss weekly how teens spent allowance or recent gifted money to understand decision thinking.
  • Compare prices together when shopping to hone budgeting skills and value consciousness.
  • Have them set savings goals and incentivize reaching them through milestone rewards.
  • Conduct research online together to learn about investing, compound interest and types of bank accounts before opening their own.
  • Play educational finance games tailored to your child’s age to reinforce money lessons through fun.

 

So How Can Finabee Help?

Here at Finabee we believe that all children should have access to financial and entrepreneurial education to inspire and build good money habits from an early age. Read a bit more about us here and how we plan to raise a generation of finance-savvy children for the future. Click here to learn more about how it works.

You can signup to the waiting list here for our app too to be one of the first to use it and be in with a chance of winning a £50 voucher!

Now that’s a savvy investment!

Financial literacy for teens sets them up for success!

For more information on this, see our other blog “Turning Everyday Moments into Fun Financial Lessons for Children” here!

 

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