Managing money is one of the most essential life skills. Yet, currently, 1 in 3 high school students does not have access to a personal finance course – even as an elective.
It’s no surprise, then, that many teens learn about money from people close to them. A 2021 survey by CreditCards.com found that 53 percent of Gen Zs get financial advice from friends and family.
If you’re wondering how to help your teen learn personal finance and what you can teach them as a parent, we have some tips. Here are four things your teen should know about money.
How to Raise a Financially Smart Teenager
Your teen needs four basic things to develop good money habits: budgeting, saving, using credit cards, and managing credit.
Let’s take a closer look at each skill.
Creating and maintaining a budget is one of the first skills your teen must learn to be successful in money management.
You can incorporate your teen into your family budget so they can see for themselves what it takes to pay the bills, save and still have some money for extra expenses.
Also, if your teen has an income — whether it’s from an allowance or from their first job — help them create their budget.
An easy way to get started is to apply the 50/20/30 rule and identify essential spending and savings goals together.
Saving money doesn’t sound that exciting to most adults, let alone teenagers. However, you can give your teen an added incentive by allowing them to save on what they need.
Whether they want a new gadget or an expensive concert ticket, encourage them to save up for it. To make the deal even sweeter, you can offer to match a percentage of their savings or even open a savings account.
Remember, this is new to your teen. It can be a bumpy ride, so give them room to make mistakes. It’s okay to make mistakes—that’s how they’ll learn.
using debit card
Now, it’s time to set up your teen with a debit card. This will allow them to feel some autonomy with money, as well as being able to practice using this essential financial tool.
On top of this, debit cards usually come with online features that will help your teen enhance his financial knowledge. In their online account, they can generally check their balance, track their spending and recurring expenses, and much more.
using credit card
Many people have a difficult relationship with debt. It’s best to make sure your teen knows the basics of how credit works and is comfortable using it before they encounter such difficulties in their adult life.
To help your teen grow into a responsible borrower, you can sign them up for a credit card. They can apply for their card only if they are at least 18 years old. Until then, you can add them to your credit card account as an authorized user.
This stage may involve more trial and error than others – even adults are often tempted to spend more on their plastics. On the bright side, this move will also kickstart your teen’s credit history and can help him build good credit.
When to give your teen a debit card versus a credit card
It may be wise to let your teen start with a debit card. That way, they can understand how money comes and goes and what it takes to maintain a positive balance.
Then, you can teach your teen to use their credit card like a debit card: If they can’t cover the purchase right away, they shouldn’t. It’s a good habit to develop to avoid credit card debt and keep credit utilization low.
There are debit cards in the market specifically designed for kids and teens, which is another reason to start with a debit card.
For example, Greenlight offers a debit card for kids and teens that comes with an app allowing for flexible parental controls. The app’s features make it easy for kids to learn how to spend and save – and for parents to manage the process.
How Greenlight Can Be a Resource
Greenlight is a debit card that your teen can use almost anywhere MasterCard is accepted, and the accompanying app provides a different experience for parents and their kids.
- Send money to children’s accounts
- Receive real-time alerts when the card is in use
- Set store and ATM controls and limits
- Schedule Allowance and Housework Pay
- track card balance
- turn card on and off
Facilities for children include:
- Tools for earning, saving, spending and giving
- educational equipment
- balance tracking
- setting financial goals
- Apple Pay and Google Pay Payments
- customizable card design
To ensure your family’s financial security, Greenlight also offers zero liability protection and FDIC insurance of up to $250,000. On top of that, the card blocks unsafe spending categories.
The basic Greenlight plan, which includes a debit card, costs $4.99 per month and allows parents to add up to five children.
The responsibility of teaching teens essential money skills often falls on the shoulders of the parents. Whether it’s budgeting, saving, or borrowing, there’s a lot to learn, and the road can be bumpy. Fortunately, there are products specifically designed to help you provide your teen with the most important money lessons and exercises.
Greenlight makes the learning process secure and easy with app-controlled debit cards and more for earning, spending, saving and more. You can try Greenlight for free for a month to see if it’s a good fit for you and your family.
Start your teen’s journey in personal finance!