Guide for Parents to Teach Teens About Money

As parents, one of the most important life skills we can teach our teens is how to manage money. It’s essential for them to understand the value of money, how to earn it, save it, invest it, and spend it wisely. Unfortunately, financial literacy is not a topic that is often taught in schools, so it’s up to us as parents to provide this critical education to our children.

In this comprehensive guide, we’ll discuss the importance of teaching financial literacy to teens, the key principles of money management, and practical strategies for helping teens become financially responsible adults.

The Importance of Teaching Financial Literacy to Teens

Money management is a life skill that every teenager needs to learn. It’s an essential part of becoming a responsible adult and a critical component of a successful future. Unfortunately, many teens need more financial knowledge and skills to make informed decisions about their finances.

According to a 2018 survey by Junior Achievement USA and the Allstate Foundation, only 51% of teens say they have a basic understanding of how to manage their money. Additionally, the same survey found that only 16% of teens say they know how to invest money.

With a solid foundation in financial literacy, teens may be able to avoid debt, build savings, and make wise investment decisions. As parents, we can help our teens develop these skills and set them on a path to financial success.

The Key Principles of Money Management

Before we dive into practical strategies, it’s essential to understand the key principles of money management. These principles will serve as a foundation for the strategies we’ll discuss later.


Budgeting is the process of creating a plan for how you will spend your money. It’s a crucial step in managing your finances and making sure you have enough money to cover all your expenses.

A budget should include all of your income and expenses. It should also account for any savings goals you have, such as setting aside money for college or a down payment on a house.


Saving is the practice of setting aside money for future use. It’s an essential component of financial management because it allows you to prepare for unexpected expenses and achieve long-term financial goals.

There are several different types of savings, including emergency savings, short-term savings, and long-term savings. Emergency savings should be readily accessible and cover at least three to six months’ worth of living expenses. Short-term savings can be used for things like vacations or a new car, while long-term savings are for major expenses like retirement.


Investing is the practice of putting money into financial instruments with the goal of earning a return. It’s a way to grow your wealth over time and achieve long-term financial goals.

There are several different types of investments, including stocks, bonds, and real estate. Each has its own set of risks and rewards, and it’s essential to understand these before investing.

Debt Management

Debt management is the process of managing your debt responsibly. This includes making on-time payments, avoiding high-interest debt, and paying off debt as quickly as possible.

Debt can be a useful tool for achieving financial goals, such as buying a house or paying for college. However, too much debt can be a significant burden, making it challenging to achieve other financial goals.

Practical Strategies for Teaching Teens About Money

Now that we’ve covered the key principles of money management, let’s dive into some practical strategies for teaching teens about money.

Start Early

It’s never too early to start teaching your children about money. As soon as your child is old enough to understand the concept of money, you can begin teaching them about the importance of saving, spending wisely, and making smart financial decisions.

By starting early, you can help your child develop good financial habits that will last a lifetime. Even young children can learn about the concept of budgeting by using a piggy bank or savings jar to save up for a toy or treat they want. As your child grows older, you can introduce more complex financial concepts and gradually increase their level of responsibility.

Use Real-Life Examples

One of the best ways to teach your teen about money is by using real-life examples. Show them how you budget for household expenses or how you save up for a vacation. Explain to them why you make certain financial decisions, such as why you choose to invest in a particular stock or why you avoid high-interest debt.

You can also use real-life examples to teach your teen about the consequences of poor financial decisions. For example, discuss the risks of taking out a high-interest credit card or the consequences of not paying your bills on time.

Teach Them to Budget

Budgeting is one of the most critical financial skills your teen will need to master. Start by helping them create a budget for their personal expenses. This could include things like clothes, entertainment, and transportation.

Encourage your teen to track their spending and adjust their budget as necessary. You can also help them set savings goals, such as saving up for a car or college.

Help Them Open a Bank Account

Opening a bank account is an essential step in learning how to manage money. Help your teen open a checking and savings account at a reputable bank or credit union.

Explain to them how to use their account responsibly, including how to write checks, use a debit card, and balance their account. Encourage them to save a portion of their income in their savings account and explain how they can earn interest on their balance.

Introduce Them to Investing

Investing can be a powerful tool for building wealth over the long term. Introduce your teen to the concept of investing and explain the risks and rewards of different types of investments.

Encourage your teen to start small by investing in a low-risk mutual fund or exchange-traded fund (ETF). Show them how to track their investments and monitor their performance over time.

Teach Them About Credit

Credit is an essential part of the financial system, but it can also be a trap for those who don’t understand how it works. Teach your teen about credit and explain the risks and rewards of using credit cards and taking out loans.

Encourage your teen to use credit responsibly, making on-time payments and avoiding high-interest debt. Show them how to monitor their credit score and explain why a good credit score is important.

Encourage Them to Earn Money

One of the best ways to teach your teen about money is by encouraging them to earn it. Help your teen find part-time work or start a small business, such as mowing lawns or babysitting.

Encourage your teen to save a portion of their income and explain how they can use their earnings to achieve their financial goals.


Teaching your teen about money is one of the most important things you can do as a parent. By providing them with a solid foundation in financial literacy, you can set them on a path to financial success and independence.

Start by teaching them the key money management principles, including budgeting, saving, investing, and debt management. Use real-life examples to illustrate these concepts and encourage your teen to practice them in their own life.

By helping your teen develop good financial habits early on, you can ensure that they have the skills and knowledge they need to make informed financial decisions throughout their life.

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