How to help teenagers manage their money

Parents play an important role in shaping their kids’ financial behaviour and attitude towards money. Many teenagers rely on their mum and dad to set the right example when it comes to managing finances.

Of course it’s not always easy to talk to teenagers about money, particularly as they approach adulthood. Bearing that in mind, we’ve pinpointed three areas where you can help prepare your kids to navigate the tricky waters of personal finance.

1. Give teenagers financial responsibility

This can be as simple as providing them with a regular fixed amount of pocket money, or giving them a budget for their weekly lunch and getting them to stick to it.

2. Set the right example

Show your kids how you manage your finances and teach them how to plan purchases. You can sit down together and use our Budget planner and get them involved in how you budget.

3. Help them manage their first wage

Getting a job is an important part of becoming financially independent. If your teenager is looking to earn some extra cash, finding employment is a great way to boost their income and an ideal opportunity to discuss money management.

Remember, it’s never too late to teach your children how to manage money. The more opportunity they have had to manage their own finances before they turn 18, the more likely they are to pick up good habits which will keep them out of problem debt and stop them coming to the Bank of Mum and Dad.

1. Give teenagers financial responsibility

Sharing responsibilities with your kids

It is important that teenagers recognise the value of money and understand that it is not an unlimited resource. Giving them the freedom to manage their own budget will teach them valuable lessons about only spending what they can afford and avoiding the pitfalls of unplanned expenses.

Pocket money and budgeting

For many people, pocket money is the first taste of financial responsibility. Providing your teenager with a regular, set amount of money and the responsibility of paying for something they want gives them their first opportunity to practise how to stay within a budget.

One way to get teenagers to take responsibility for their money is to give them a set budget for a specific task. This could mean setting your son or daughter a monthly budget for their lunch. If they take this money and spend it on clothes, or going out, then they will learn a valuable lesson when they find themselves stuck having to bring in sandwiches from home.

Just over half of 15-17 year olds who receive money on an ad-hoc basis keep track of their income and spending. In contrast, almost two in three of those who receive a regular, fixed sum are aware of their financial incomings and outgoings.

Part of teaching your teenagers how to manage their finances comes down to being strict with the money you give them and not bailing them out if they overspend. Better they learn the hard way now while the amounts are small, rather than later when overspending can lead to problem debt.

Our research has shown that nearly eight in ten 15 – 17 year olds who cover unexpected mobile phone expenses from their own pocket say they keep track of their income and spending. Just over half of those who turn to mum and dad to cover unexpected costs claim to keep an eye on their financial incomings and outgoings.

2. Set the right example

Learning from parents

When it comes to managing finances, many teenagers mimic their parents’ behaviour. So if you’re the type of person who saves up to buy something, then it’s more likely that your kids will do the same. If, on the other hand, you’re quick to turn to credit to fund non-essential purchases, your kids are likely to follow in your footsteps.

One way of setting the right example is by including your teenagers in some of your financial decisions, particularly as they reach their late teens. This could include showing them how you shopped around for a better deal on your current account, or sitting down with our Budget planner tool to work out a monthly budget. You can take this a step further and send them out to do some grocery shopping with a list and strict budget. Just be careful you don’t end up with a kitchen full of sweets and crisps!

It’s also a good idea to be open with your kids about some of the financial mistakes you made when you were younger. Sharing your tales of woe can be a good way to highlight the dangers of poor money management. Whether this means telling them about the time you couldn’t afford to fix the fridge after it broke down, or how not getting your home insured cost you thousands after a burglary, these are valuable lessons you can share.

Developing a savings habit

Learning about the importance of saving and only buying things which you can afford is an important part of adult life. Whether this means encouraging your teenagers to put aside a small amount every week to buy new shoes, or longer-term planning for a larger purchase, leaning to save is a vital skill. Without it your kids may not be able to achieve their long term goals, such as buying a car, going to university or providing a home for their family.

It can be difficult to talk to teenagers about the need to save. However, there are certain opportunities you can seize. If, for example, your teenager is interested in taking driving lessons, this is a great time to sit down with them and work out how to meet the cost. This might mean looking at how much needs to be put aside each month, or searching for a part time job.

Want to find out more about getting your kids into the savings habit? Read our guide to Savings accounts for children.

3. Help them manage their first wage

If your teenager is trying to save up for a large purchase, or simply wants some extra spending money, one option is to find a job.

Getting a job can be a teenager’s first step towards financial independence and can play a key role in preparing them for the future. While many teenagers take on informal employment such as babysitting for family friends, anyone over the minimum school leaving age can work full time.

If your kid does get a first job, this will often result in an increase in the amount of cash available to them. This is great opportunity to put some time aside and talk to them about the importance of saving. This can be as simple as deciding to put aside a certain sum each month for a rainy day, or, if they have a set goal, helping them make sure they reach it.

For example, if your teenager would like to buy a car, you could show them how to set-up a Direct Debit to their savings account each pay day. This will make saving automatic and make it easier for them to stick to their budget. You can also help them understand their payslip and talk them through everything they need to know to make sure they’re signed up to the right bank account. You could even direct them to our Car costs calculator, which will help them find out how much it costs to run a used car over a year.

Looking for money management tips for teenagers and young adults? Have a look at The Site’s Money Management Tips section, or in Young Scot’s Budgeting sectionopens in new window.