Money management for teenagers

Modelling money management

Your child learns by watching how you deal with money. So one of the best ways to help your child learn skills for managing money is by modelling responsible attitudes to money and money management.

For example, you can send responsible and positive messages when your child sees you:

• making a family budget and sticking to it
• setting savings goals
• setting aside money for emergencies
• prioritising the things you need to buy over the things you want to buy
• working hard to save for something
• organising your earnings to pay bills
• avoiding impulse buying.

Getting your child involved in household finances is a good way to help your child learn about managing money. For example, you and your child could do things like working out a savings plan for your next family holiday or checking out better deals for your phone plans.

Encouraging responsible money management

As your child gets older, it’s a good idea to give your child more control and responsibility over their own money and how they spend it. With guidance, this will help your child learn important and lifelong money management skills.

It might help to work out some clear guidelines about using money with your child – for example, you could discuss how much can go into savings, spending and donating. And it’s important to guide your child towards saving money, rather than spending it all.

Spending money

Part of learning about managing money is learning to spend responsibly and appreciate the value of things.

These tips might help with your child’s learning:

• Encourage your child to price and manage their weekly costs. This might include school bus fares, social outings and so on. A budgeting app can help.
• Let your child buy birthday, Christmas or other presents for their siblings or other extended family members. Working out what to spend will help your child learn to plan and budget. And your child might also better appreciate the gifts they get from others.
• Give your child a budget for their birthday party to decide what to buy or where to go.
• Show your child household bills as they arrive. Ask your child to compare these to previous bills and check whether the bills are covered by your budget.
• Challenge your child to find better prices for things that your family regularly buys – for example, your weekly groceries.
• Encourage your child to buy something only if they have the money for it. Be careful of ‘Buy now, pay later’ services because they often have fees.

It can be easy to spend more than you plan to using a debit or credit card. If your child has one of these cards, it’s a good idea for them to check their card’s account balance before making purchases. This way they’ll know how much money they have to spend.

Earning money

If your child wants to start earning their own money, there are many ways you can support this.

Some families give children and teenagers pocket money. If you decide to give pocket money, you might want to think about whether pocket money includes payment for help around the house. Some families pay children for a few extra jobs, particularly if it helps children towards savings goals. But other families feel that everyone should contribute towards household jobs without expecting payment. There’s no right or wrong – it’s about what suits you and your family situation.

Some teenagers want to earn their own money working outside the home. If this interests your child, they could look into doing informal jobs for friends or extended family – for example, feeding pets while people are on holidays, babysitting or cleaning cars. These kinds of arrangements also strengthen young people’s social skills and ability to accept payment graciously.

Your child might also be interested in doing part-time or casual work. A part-time job can also help your child build skills, experience, confidence and contacts for future employment.

Saving money

As they grow up, teenagers start to think about saving for things they want. This is a key step in learning money management and developing responsible financial habits.

These tips can encourage your child to save:

• Encourage your child always to save some of their pocket money or birthday money.
• Help your child set short-term and long-term savings goals. If your child is saving cash, you can use a chart to track how close they are to their goals. If your child is depositing money into a bank account, they can check their savings online.
• Help your child set up a savings account with restricted access, making it harder for them to spend their money straight away. Accounts with parental controls are often free and allow your child to access their statements and balance online.
• Try a family-friendly, safe budgeting app. Your child can use it to set a savings goal and track their saving and spending.
• Encourage your child to shop around for the best savings account. Many banks offer no-fee accounts for people under 18 years.

Borrowing money and lending money

You’ll probably be your child’s first lender. This is a good chance to teach your child about the importance of repaying loans as part of money management.

For example, perhaps your child has been saving for some special sneakers and now they’re on sale. You might lend your child the last $20 that they need so they can buy the sneakers before the price goes back up. But you might also discuss and agree on a repayment plan. You could write up the agreed plan and check off repayments as they come in.

You might also want to discuss borrowing money from friends or lending money to friends. Is it something you encourage? You could talk about why or why not and the importance of paying money back as soon as you can.

Understanding digital money

Children often start learning about money management using cash, but a lot of money management involves digital money. This includes using debit cards, credit cards, gift cards and making online transactions.

It’s also important for your child to understand that using a debit or credit card takes money from their bank account. And that this happens straight away for debit cards and at a later date for credit cards. Checking their account balance regularly can help with this.

It’s good idea to talk with your child about the pros and cons of using a debit or credit card. For example, debit and credit cards are convenient to take with you but it’s harder to keep track of spending. If you overspend, there are fees and charges that you’ll need to pay. And with credit cards, it’s possible to get into debt and that can affect your credit rating.

In Australia, you need to be at least 18 years old to apply for a credit card in your name. But children who are at least 16 years old can be added as an additional cardholder on their parent’s or carer’s credit card. This can be a good way for children to practise using credit cards before they have one of their own.

When your child starts using digital money, responsible digital citizenship will help them keep their money and accounts safe. This includes knowing how to protect passwords and learning to recognise scams.

Making mistakes with money

Your child will make some mistakes with money management, whether it’s spending a week’s allowance in 2 days, spending a lot on something that doesn’t seem so good once they’ve bought it, or getting their budget wrong and not having enough money left for the bus.

Instead of giving your child more money, it’s a good idea to talk with your child about what they learned from the experience and what they might do differently next time.

Here are tips to help you talk with your child about money management mistakes:

• Let your child know that they should speak to you as soon as possible if they think they’ve made a mistake.
• Listen non-judgmentally as your child explains what has happened, and praise your child for telling you.
• Problem-solve with your child. This is better than jumping in with solutions.
• Talk about a time you made a poor decision with money and what you did to fix it.

It can be easy for teenagers to run up large mobile phone bills. It’s a good idea to talk with your child about different types of phone plans. You can suggest starting with a pre-paid plan that has a monthly limit or agree to track your child’s spending on their phone plan to avoid overspending.