At Foothill Credit Union, we're all about empowering our young members to achieve financial success. We understand teens juggle school, activities, and maybe even a part-time job. That's why we want to help make learning about money easy.
Understanding personal finance is a crucial life skill that sets the stage for a secure and fulfilling future. It teaches young people to navigate the complexities of budgeting, saving, and investing confidently.
Read on to learn more about money management for teens.
As a parent, you want to empower your teen with the skills they need to succeed in life. Financial literacy is crucial to help them make informed choices and achieve their dreams. Understanding how money works in the real world allows your teen to set themselves up for long-term success.
Teach your teen about finances to help them avoid debt and make smarter decisions about college, cars, and more. They will be better equipped to handle the financial challenges they'll face in the future—and you'll have peace of mind knowing they're on the right track.
Parents play a significant role in shaping their teen's financial future. Teaching your children essential money management skills allows them to make informed decisions and sets them up for long-term financial success. Here are ten crucial skills to focus on:
Start by helping your teen identify income sources such as an allowance or part-time job. Work together to categorize expenses like food, entertainment, and savings. This will give them a clear picture of where their money is going and help them adjust to achieve their financial goals.
This may sound basic, but it’s important to explain the difference between “needs” and “wants.” Needs are essential expenses like food and shelter, while wants are discretionary, like video games or concert tickets. Encourage your teen to prioritize needs over wants and to allocate their money accordingly.
This will help them develop a sense of financial responsibility and will put them on the path to making smarter financial decisions.
Encourage your teen to set aside a portion of their income regularly, even if it's just a small amount. You can also suggest setting up automatic transfers from their checking account to their savings account. This will help them develop a savings habit and build a safety net for the future.
Use a simple example to explain how compound interest works, such as how a savings account earning 2% interest per year will grow dollars in just twelve months. Show your teen how their savings can grow exponentially over time and how saving early in life can make a big difference in the long run.
Explain to your teen that credit scores are like a report card for their credit behavior. A good credit score can open doors to better loan terms and lower interest rates, while a bad credit score can make it harder to get credit. Teach them the importance of paying bills on time, keeping credit card balances low, and monitoring their credit report.
Talk to them about the potential consequences of debt such as high interest rates and damaged credit scores. Encourage them to think carefully before borrowing money and to have a plan to repay debts. Explain the differences between good debt (like student loans) and bad debt (like credit card debt).
Introduce your teen to the concept of taxes, explaining that they're a necessary part of life. Teach them how to file taxes correctly and pay them on time to avoid penalties. You can also discuss the benefits of tax-advantaged savings accounts, like 529 plans.
Explain that investing can grow their money over the long term. Discuss the different types of investments such as stocks and bonds and the associated risks and rewards. Encourage them to start small and diversify their investments to minimize risk.
Work with your teen to set specific and achievable financial goals, such as saving for college or a car. Encourage them to break down their goals into smaller, manageable steps and to track their progress along the way. This will help them stay motivated and focused on their financial objectives.
Life is unpredictable. Explain how an emergency fund—which is money set aside specifically for unexpected expenses—can help anyone avoid debt when life throws a curveball. Advise them to save enough to cover at least three to six months of essential living expenses when creating their emergency fund.
As a parent, you want to give your teen the tools they need to succeed financially. That's why we created MoneySmart, a savings account designed to help teens from 13-17 years old develop good money habits.
With MoneySmart, your teen can:
Goal Setting & Tracking—With MoneySmart, your dreams become goals. Our built-in tools make it easy to set savings targets for anything you want and track your progress every step of the way. You'll see your money grow, which can be incredibly motivating!
Budgeting Made Easy—MoneySmart takes the guesswork out of budgeting. Our free budgeting tools help categorize spending, so you know exactly where your money goes. For added peace of mind, parents can easily monitor the account.
Rewarding Savings—We believe in rewarding good habits. That's why MoneySmart offers competitive interest rates, helping your teen’s savings grow faster. They can become amazed by the power of compound interest!
Foothill Credit Union is dedicated to helping your teen become a money expert. We offer free online resources, calculators, and advice to help your teen become a financial whiz. We're dedicated to empowering young people with the knowledge and tools they need to make informed financial decisions.
Here are just a few of the many features of our MoneySmart account:
Empowering your teen with financial knowledge is one of the most valuable gifts you can give. At Foothill Credit Union, we’re here to help you teach your teen excellent money habits with our MoneySmart account and expert financial education.
Click below to explore our savings accounts for teens and start yours on the path to financial independence.
