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4 things your teenager should know about money

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Managing money is one of the most essential life skills. Yet, currently, 1 in 3 high school students has no access to a personal finance course — even as an elective.

It’s no wonder, then, that many teenagers learn about money from those close to them. A Creditcards.com survey from 2021 found that 53 percent of Gen Z get financial advice from friends and family.

If you’re wondering how to help your teenager learn personal finance and what you can teach them as a parent, we have a few suggestions. Here are four things your teenager should know about money.

How to raise financially smart teenagers

There are four basics your teenager needs to develop good money habits: budgeting, saving, using a credit card and managing credit.

Let’s take a closer look at each skill.

Budgeting

Creating and maintaining a budget is the first skill your teenager should learn to be successful in money management.

You can involve your teen in your family budget so that they can see for themselves what it takes to pay the bills, save and still have some money for additional spending.

Further, if your teenager has any income—be it from an allowance or their first job—help them create a budget of their own.

An easy way to start is to introduce the 50/20/30 rule and identify essential expenses and saving goals together.

Saving

Saving money doesn’t seem that exciting to most adults, let alone teenagers. However, you can give your teen an extra incentive by letting them save on their wants.

Whether they want a new gadget or a pricey concert ticket, encourage them to save for it. To make the deal sweeter, you can offer to match a percentage of their savings or even open a savings account.

Remember, this is new for your teen. It may be a bumpy ride, so provide them with room for mistakes. It’s okay to make errors—this is how they’ll learn.

Using a debit card

Now, it’s time to set up your teenager with a debit card. This will allow them to feel some autonomy with money, as well as be able to practice using this essential financial tool.

On top of that, debit cards typically come with online features that will help your teen continue to grow their financial knowledge. In their online account, they can typically check their balance, track their spending and recurring expenses and more.

Using a credit card

Many people have a difficult relationship with debt. It’s best to make sure your teenager knows the basics of how credit works and is comfortable using it before they encounter such difficulties in their adult life.

To help your teenager grow into a responsible borrower, you can sign them up for a credit card. They can only apply for their own card when they’re 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 the others—even adults are often tempted to overspend on their plastic. On the bright side, this step will also kickstart your teen’s credit history and can help them build good credit.

When to give your teen a debit card vs. a credit card

It may be wise to let your teenager start with a debit card. This way, they can get the sense of 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 a purchase right away, they shouldn’t make it. It’s a good habit to develop to avoid credit card debt and keep credit utilization low.

There are debit cards on the market designed specifically for kids and teens, which is yet another reason to begin with a debit card.

For instance, Greenlight offers a debit card for kids and teenagers that comes with an app allowing flexible parental controls. The app’s features make it easy for kids to learn spending and saving—and for parents to manage the process.

How Greenlight can be a resource

Greenlight is a debit card your teenager can use almost anywhere Mastercard is accepted, and the accompanying app provides different experiences for parents and their kids.

Parents can:

  • Send money to kids’ accounts
  • Receive real-time alerts when the card is used
  • Set up store and ATM controls and limits
  • Schedule allowance and chore payments
  • Track the card’s balance
  • Turn cards on and off

The features for kids include:

  • Tools for earning, saving, spending and giving
  • Educational tools
  • Balance tracking
  • Setting financial goals
  • Apple Pay and Google Pay payments
  • Customizable card design

To ensure your family’s financial safety, Greenlight also provides 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 kids.

The bottom line

The responsibility to teach teenagers essential money skills often falls on parents’ shoulders. Whether it’s budgeting, saving or borrowing, there’s a lot to learn, and the road can be bumpy. Fortunately, there are products designed specifically to help you provide your teen with the most crucial money lessons and practice.

Greenlight makes the learning process safe and easy with an app-controlled debit card and tools for earning, spending, saving and more. You can try Greenlight for free for one month to see if it’s a good fit for you and your family.

Let your teen’s journey into personal finance begin!

Written by
Ana Staples
Credit Cards Reporter and Young Credit Analyst
Ana Staples is a reporter for Bankrate and an expert on all things credit basics and personal finance for the younger generation.
Edited by
Editor, Branded Content