What Is the Best Tool for Teaching a Teen to Manage Money? Parents Weigh In

by Reader Contributors

Best Tool for Teaching Teen to Manage Money photo

Cash vs. debit cards. Parents weigh in on the best tool for teaching a teen to manage money in our almost cashless, digital world.

Dear Gary,
My teen son just started his first job, and as much as I hate to admit it, we have not taught him much about managing and budgeting money outside of the importance of saving. For the longest time, my husband and I used a cash envelope system to budget our money, but I know many people no longer carry cash. And since young people already do everything on smart phones and computers, should we just have him open a checking account with a debit card and teach him how to manage his money and pay bills online?

I have also heard mention of some teens using prepaid cards to learn to manage money.

I am just curious how other parents teach their teens about money and what advice they could offer about what seemed to work best with their teen in this digital age we live in. Thank you for your time and your readers’ time.

When Consequences Are Small

I think you should set him up with the system you believe he is most likely to use as a young adult. My guess is that’s a bank account with a debit card. This way, he can learn about the possible consequences of failing to keep track of his balance, the extreme ease of overspending by swiping, bank and ATM fees, etc., while he has close supervision and any mistake would be small.

Start with a Prepaid Card

We might live in the digital age with a lot of ways to manage money, but to a beginner, it does not make a person a good money manager.

I would start with a prepaid card and see if there is any money left on it between paydays. Not managing a checking account correctly can add up to a lot of overdraft fees. Get a checking account ledger at the bank, so he can keep up with his spending on a prepaid card.

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Informative Program Suggested

I am a retired employee of FDIC, Federal Deposit Insurance Corporation. It’s a great place to work, as a matter of fact! The FDIC has a program available to the public entitled “Money Smart.” It is a great tool for teens and adults alike.

Time-Honored Ways Still Work

To teach a teen to manage money, the time-honored ways still work, even if you switch to a digital approach.

First, have your teen set goals. A long-term goal might be money for college. A short-term goal might be a cellphone upgrade or building his own computer. It doesn’t matter. What does matter is that these are his goals. (See Successfully Setting and Achieving Financial Goals.)

The envelope system can be virtual. He can put away money for casual spending, charitable giving, long- and short-term goals, etc. He can use free software such as Mint.com to track this money. (See The Envelope Budgeting System in a Cashless Society.)

He may or may not need a checking account. This depends on his obligations. Is he paying for a car, his cellphone, or other monthly bills? I would steer clear of prepaid credit cards due to the fees involved. Why waste money?

Set up a monthly time to review his system with him to see how it is working. He may find he needs to tweak his system, so it works best for him.

Most of all, do not underestimate the example you set for your son by the way you manage your own money. Your responsible use of money over time has already and will continue to teach your son money management.
Barbara in SC

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Mom of Teen Girls Shares Her Experience

Our two girls are 14 and 15, so we know about this. It started when they were little and we had the blue plastic banks with three slots for savings, giving, and spending. Now they are both making lots of money and managing it more on their own with our guidance.

They each opened a teen checking account when they turned 14 that’s tied to our account, so I can see it when I pull up ours. I transfer $25 to their checking account every payday for their clothing allowance. They also get a regular allowance. They need to save half of it and can spend half of it. Plus, they both do a lot of babysitting and work for two different churches doing childcare. Half of all their earnings go in savings. We have talked to them about upping that amount as time goes by, so their savings will grow even faster.

They both do a lot of camps and outings with youth group, etc. We usually pay the fee to go and they use their money for spending money.

We want to teach them to be resourceful and hardworking. They definitely know the value of money. Our 14-year-old helps me with my dog sitting business and I share the earnings with her. She loves dogs and sees that helping willingly earns her money.

They both have cleaning jobs around the house. At first, when they started saving, it seemed like such slow progress. But, they each have over $2000 ($1000 was from my parents) in their savings. We talk with them frequently about choosing a college that is affordable, so they won’t go into debt to get a degree. We can help a little, but they will need to work and get scholarships and choose a college they can afford. Debt cripples new graduates. I wish I would have been better with my money in my younger years, but we are getting better.
Diana in Charlotte, NC

Reviewed December 2021

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