Money management for teens [the ultimate guide]

Money management for teens [the ultimate guide]

Parenting teenagers can be challenging. Money issues are often the last item on your list to discuss with them. But their newfound independence and reliance on peers actually make this the perfect time to talk to teens about money management. Here's how to equip them with the knowledge and skills to successfully manage their money for life. 


Related: Guide to financial literacy for kids

Money management for teens: top tips

  1. Use teen development cornerstones to discuss money issues

  2. Give teens more financial freedom

  3. Let teens know where money comes from

  4. Help them understand their paychecks

  5. Talk about needs versus wants

  6. Lead by example

  7. Help teens understand savings and set goals

  8. Knowing how to create a budget

  9. Spend wisely & track spending

  10. Explain the concept of giving

  11. Allow teens to make money mistakes



Use teen development cornerstones to discuss money issues 

Adolescence is a period characterized— along with many good traits — by risk-taking, poor decision-making, and a push for independence. For parents, it can be an anxious time. But you can use these normal teen behaviors to bring home some key messages about financial responsibility.


This means guiding your teens without overdoing it. Teenagers often learn the hard way that being irresponsible with money has consequences. When they run out of money, instead of giving them lectures – or handouts from the bank of mom and dad – start a conversation around choices and potential solutions. 


Ask what they feel they could have done differently. Brainstorm ideas around how to safeguard themselves from this happening again. Like budgeting, tracking their spending, and recouping some of their losses through earnings.

Give teens more financial freedom

Teens need financial freedom. Without it, how will they learn how to manage money? It’s important they grasp the fundamentals of using debit cards, ATMs, and spending on and offline. One of the best ways to do this is to give them a regular allowance. Another is to provide them with a prepaid kids debit card like GoHenry. 


GoHenry gives teens the chance to flex their financial independence, while you get peace of mind. Through the parent app, you can make sure they don’t overspend by tracking their spending. You’ll get alerted every time they make a purchase. And you can set limits on single purchases and ATM withdrawals too.

Let teens know where money comes from and, most importantly, how to earn it

It's also crucial teenagers recognize the value of money and understand it's not an unlimited resource. The best way for them to learn this is by managing their allowance. Let them find out for themselves what happens when they overspend without thinking. Or spend more than they can afford.


Hand in hand with this comes earning. Our latest Youth Economy Report shows that 78% of young people in the US believe earning their own money is important. And 50% of US kids say they already 'work' for their allowance. 


Beth Zemble, VP of Education, GoHenry, agrees. "As teens develop and begin to make financial and money management decisions to reach their own goals, they need to include money they’ve earned, rather than solely relying on money they’ve been given.  Using money they have earned helps kids to understand both the value of earning and the value of money by helping them to appreciate the connection between their labor and the financial gain.”


If your teens are too young to get a job, brainstorm ways they could earn extra money. Ideas include helping out at home (teens are responsible enough to babysit for younger siblings) looking after family pets and even helping with DIY.

Help them understand their paychecks

For teens with jobs, it may be the first time they’ve seen a pay stub. Explain to your teens why it’s important they understand what this document (digital or physical) tells them. And what it shows them about their earnings. 


By helping your teenager understand their paycheck you’ll be arming them with a money management skill that’ll come in handy as an adult. They’ll need a payslip for proof of earnings when applying for a mortgage, renting a property or taking out a loan. Pay stubs make filing taxes easier too. 

Talk about needs versus wants 

Another aspect of money management to explain to your teen is needs versus wants.  Try using real-world examples they can relate to. For example:


You might think you need new sneakers, but if you have three pairs already that fit, what you really mean is you want new sneakers. If, on the other hand, you’ve grown out of your sneakers, you need new ones. 


Giving your kids an allowance or offering them opportunities to earn money with extra tasks around the house can also be an excellent way to teach needs versus wants. With their own money, they’ll learn to consider whether they want a purchase, and think before they buy.


Lead by example

Just like younger kids, teens observe you all the time. Tell them not to gossip and then do it yourself,  they'll soon call you out on it. The same goes for money messages. If you tell them to budget, track their money, and not overspend, make sure they don't see you doing the opposite.


"Teens develop attitudes towards frugality and self-control which are informed by the adults in their lives,” says Beth Zemble. “This means you must be aware of the unconscious messages you send out around money management. Complaining you didn't save enough money for bills, overspending when you feel stressed, or not having enough for unplanned expenses won’t help teens to make smart financial choices.”

Help teens understand savings and set goals 

Research from the Royal Economic Society, shows teens who are encouraged to save are far more likely to continue saving as adults. Try to avoid always stepping in to pay for what they want. Encourage them to set up savings goals on the GoHenry app instead. Whether it’s new sneakers they’re saving for, concert tickets, or a new phone, they can set a target and work towards it. That way, they’ll soon learn the rewards of delaying gratification too.


Related: How to save money as a teen, How much should teenagers have saved?

Knowing how to create a budget

Budgeting is a skill that’ll set your teens up for a financially healthy future. Teaching your teens to budget puts them in control of their money. They’ll be less likely to find themselves in debt later in life. 


Explain a budget is a monthly spending plan based on the money you have coming in (income) and what’s going out (expenses). A plan outlining where your money is going makes it easier to avoid overspending.  


Help your teenager create a weekly or monthly budget using real-life examples. Have them sit alongside you when you next balance yours. Or use a bank statement to show them your monthly outgoings.

Spending wisely & tracking spending

Spending wisely can be tricky for teens. There’s peer pressure to deal with for one thing. Plus so many temptations out there which are more accessible thanks to having a part time income. Those ‘must-have’ purchases become more expensive in the teenage years, too. Giving into impulse buys can blow a budget in seconds. 


Explain to your teen how tracking their spending will help keep them within their budget. Keeping tabs on what’s gone out and what’s left over will help them make wiser spending choices. The GoHenry app can help them see this in black and white.  

Being a critical consumer

Teaching your teen to become a critical consumer will help them make better decisions when it comes to spending money. Returning unwanted items bought on impulse online or in-store isn’t always straightforward. It’s better to avoid having to do that in the first place. 


If you’re a critical consumer, you make informed spending decisions. Basically, you think before you buy. It’s not just about stopping yourself from buying stuff you don’t really need, it means searching for discounts and better deals.


Knowledge of borrowing and interest

Understanding borrowing and interest is a key part of your teenager’s financial education. Explain what interest is to teens and how it makes borrowing money from banks or lending institutions more expensive. 


At this stage, they won’t be able to take out a bank loan, but most kids ask to borrow money at some point. Take the opportunity to talk to them about how they found themselves in this situation. 


Is it because they haven’t budgeted properly? Discuss the value of having an emergency fund to cover unexpected expenses. And if they do borrow money from you or from friends, make sure they pay it back. 


It’s also a good idea to talk to your teenager about credit. With a solid grasp of how credit works, they’ll be less tempted to spend money they don’t have on credit cards when they leave home. And less likely to get into debt as adults.


Understanding credit & responsible use

Building credit early can help establish a good credit history for your teenager. It’ll benefit them if they want to apply for an auto loan, student loan or when they’re older. While your teen can’t legally have their own credit card account until they’re 18, they’re allowed to be an authorized user on yours. 


Should teens have access to a credit card?  It’s a lot of responsibility. Before you decide, you should make sure they’re armed with the facts.


Related: Credit card facts for kids and teens





Learning the importance of a good credit score

Explain the benefits of good credit scores to your teen. Show them how to check their credit reports and explain why it’s important to do it regularly. Not just in case they’ve fallen victim to identity theft but so they can rectify mistakes or take steps to improve their credit rating if it’s slipped. 


It’s also a myth that checking your credit score lowers your score. There's a difference between checking your own score and a hard check, from a lender, checking your score. 


Building knowledge of investing

Along with budgeting and saving, investing is a key money management skill. It’s a tool like no other your teens can use to make their money work for them. 


In the US, your kids must be 18 to legally open an investment account or buy stocks on their own. But there are still lots of ways under 18s can learn to invest. They can also put theory into practice. As a parent or guardian, you can open a custodial account and supervise their investments until they reach majority age. Then they can take control. 


Money Missions by GoHenry, is a great way of helping to teach children about responsible investing. With bitesize money lessons, youngsters can build their financial literacy and confidence and learn about investing in stocks and shares.

Understanding the benefits of compound interest on cash savings

Thanks to the power of compound interest and because teens have time on their side, it gives them more time to see their cash savings grow. And see bigger returns.  


Explain how compounding only works over a long period. Try motivating your teenager by showing them how to use a compound interest calculator


Fraud and online scams

Your teens may be tech-savvy, digital natives, but that doesn’t make them immune to fraud and online scams. According to the Federal Bureau of Investigation’s internet crime report, young people under 20 lost a total of $101.4 million to hackers last year. 


Teach your kids how to keep their money safe online. Encourage them to protect themselves from debit card fraud by checking their account balance regularly, keeping their PIN safe and destroying old cards. 

Explain the concept of giving

What lessons do you want to pass on to your teen about giving and the importance of charity? Forcing a teen to give money may be a battle. You’re better off leaving it to them to decide. 


Help them find causes they feel strongly about. Or choose a problem they’re passionate about and help solve it by raising money for the cause. Who knows, you might have the next Greta Thunberg on your hands. 


Common teenage financial problems and worries

Just like adults, teenagers worry about money. Common teenage financial problems include:


  • Not earning/having as much money as their friends

  • Not being able to buy what they want

  • Spending more than they earn

  • Borrowing from friends or paying for friends  

  • Struggling to meet savings goals.


“Our research shows most young people worry because they don’t have the financial knowledge they need to make better decisions,” says Louise Hill, Co-founder and COO of GoHenry. “Educating them to show them how to resolve their financial worries and problems will help reduce the likelihood that they’ll develop risky financial habits.”


Luckily there are lots of ways you can help your teen deal with their financial worries. And safeguard them from future financial risk. Developing their financial literacy is key. So is teaching them effective money management skills like budgeting, identifying wants versus needs and learning to delay gratification.


Allow teens to make money mistakes

As most successful business owners and entrepreneurs will tell you, we learn from our mistakes, not our successes. 


Sure, it’s frustrating when your teen does exactly what you warned them not to do a thousand times. But it’s important they learn from their money mistakes now. That way they won’t make them in the future when they’re earning a salary and paying a mortgage. 


Activities to teach money management to teens

Healthy financial habits take time to develop. Teen money management activities help reinforce what you’re teaching them. The sooner they start putting their money skills into practice, the more time they’ll have to develop them under your guidance. 


Here are some activities to help teenagers build their financial literacy:

  • Read books about personal finance — books such as Get a financial life (Beth Kobliner) and I want more pizza  (Steve Burkholder) are aimed at teenagers. 

  • Play games — board games like Monopoly, PayDay and the Stock Exchange game are fun ways to learn about managing money. There are online games useful for teaching teens money skills too. Second Life is a good one for learning about the economy. Time for Payback takes teenagers through college, challenging them not to fall in debt. SPENT is excellent for teaching budgeting.

  • Managing an allowance — paying your teen’s allowance through the GoHenry app enables them to set savings goals, track their spending, and budget till their next payment’s due. And they can use their prepaid debit card to spend their money online and in-store too. 

How to help build your teen's money management skills with GoHenry

GoHenry is packed with features to hone your teen’s money management skills. From saving to smart spending, budgeting and more. Our in-app Money Missions make learning fun and are designed to accelerate your teen’s financial literacy. 


You can support your teenager via GoHenry’s companion app for parents. You’ll get real-time alerts every time they make a purchase, pay in their allowance on a regular basis and set spending limits too. 




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Written by Anita Naik Published Aug 7, 2023 ● 12 min. read