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Managing Your Money

Money Management for Teens

From paying allowances to opening bank accounts, when it comes to teenagers and money, parents often play the role of employer, teacher and financial advisor. And while the job may not always be easy—and opinions often vary, one thing that most parents and teens can agree on is that Learn more about savings accounts for a rainy day is a good first lesson when teaching your teens about smart money management.

Infographic: Money Tips for Teens Show infographic Text Version

Money 101: For parents & teens

Parents face numerous dilemmas about their kids and their kids’ money: how much allowance to pay, when to open their bank accounts, how to teach the value of a dollar. Opinions and approaches may vary, but saving for a rainy day is always smart. Here’s why.

Watching the money grow

Even at face value, putting a little away each day will grow into a fat piggy bank. Amount set aside each year:Note: Not adjusted for inflation

Quarters Half Dollar Dollar
1 year = $91 1 year = $183 1 year = $365
5 years = $455 5 years = $913 5 years = $1,825
10 years = $913 10 years = $1,825 10 years = $3,650

The average teen carries $30 in cash and keeps $742.70 in a savings account.

Where teens stash their cash

Teenagers spend and save through many financial means. Teens’ financial portfolios:

  • 63%: Savings accounts
  • 23%: ATM/debit cards
  • 18%: Checking accounts
  • 9%: Paypal/internet accounts
  • 8%: Stocks/investing
  • 5%: Pre-paid credit cards
  • 4%: Parents’ ATM cards and their own credit cards
  • 1%: Parents’ credit cards

They work hard for the money

How do teens between 13 and 17 earn their money? By waiting on tables, babysitting, mowing lawns –even borrowing from their parents. What teens do to earn money, 2011:

13- to 15-year-olds 16- and 17-year-olds
Babysitting Pet care: 24% 19%
Walk dogs: 6% 6%
Lawn/yard work: 21% 14%
Household chores/run errands: 40% 30%
Tutor: 2% 4%
Work at restaurant: 3% 8%
Work at store: 3% 10%
Work at other business: 6% 19%

Lower- and higher-income teens are more likely than middle-income teens to have a credit card, rather than earn an allowance.

Where teens get money, 2011

13- to 15-year-olds 16- and 17-year-olds
Gifts: 45% 41%
Job: 25% 38%
Parents: 49% 54%
Others: 30% 25%
Allowance: 11% 11%
Selling Things Borrowing: 5% 9%

Where does it all go?

Teens between 13 and 17 spend money on a variety of expenses each week.

13- to 15-year-olds
Beverages and snacks: 37%
Eating out: 29%
Candy: 15%
Clothes and shoes: 13%
Movies & video games: 11%
Music: 8%
School lunch: 7%
16- and 17-year-olds
Beverages and snacks: 20%
Eating out: 29%
Candy: 11%
Clothes and shoes: 17%
Movies & video games: 15%
Music: 13%
School lunch: 7%

5 Lessons for your teens

  1. Save for a rainy day
    A healthy personal finance plan starts with an action many of us struggle with: saving. From the time your kids are old enough to express their own desires, try to teach them how to save for items big or small.
  2. Demonstrate your worth ethic
    From early on, your child should understand that money isn’t something to receive for free but something to earn by working hard for it.
  3. Understand budgets
    Children should understand that Mom and Dad have limited funds to use each month. By learning about budgets – what they are, how they work, and why they’re important – kids start employing these ideas with their own money.
  4. Compound interest
    Saving money every day is great – but you can earn even more through compound interest. Talk with your kids about how money earns interest over time and helps an account grow faster.
  5. Be careful with credit
    Credit cards are great tools for a healthy financial lifestyle – but, of course, they’re not free money. Teens need to know that from the start, and that to use a credit card, they need to plan carefully.

Editors′ Notes

Sources: Bureau of Labor Statistics, C + R Research, Youth Markets Alert: Money Matters: How Much Money Teens have, Where They Get It, And What They Purchase And Save.

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Although your priorities are likely to be different than those of your teenagers’, money management for teens is basically the same as money management for adults—just on a smaller scale. By setting goals and developing savings plans, you can help your teens understand how to save for what’s important to them. You can also talk with your kids about a variety of money topics, like how interest-bearing savings accounts can help their money grow even faster. Follow up by helping them open their own accounts so they can watch their savings build over time.