Financial responsibility for teenagers—where do you even start? Most parents teaching financial responsibility to teenagers focus on a few basic concepts, including how to set up a budget and save for the future.
However, financial literacy for teens, especially in our modern world, goes far beyond spending and saving. Your children will need to know how to make purchases online, for example, and how to avoid online financial scams. They’ll probably do most of their shopping on mobile, using digital wallets to quickly tap their way through transactions—which means teaching your kids how to think before they buy, and how to avoid making the kinds of impulse purchases they may later regret.
Plus, today’s teens need to understand not only saving, but also investing—especially in a world where much of the money they spend in retirement could derive from the 401(k) contributions they make at their first job. Teaching your children about index funds, ETFs and cryptocurrency has become an essential task for parents—even though many parents may still feel a little unsure about which investments offer the lowest potential risk or the highest potential reward.
That’s where Greenlight can help. Not only does Greenlight offer one of the best debit cards for teens on the market, but Greenlight’s suite of services also gives your teen the opportunity to set savings goals, earn compound interest and even get started with investing. Parents stay informed at every step of the process, getting notifications every time your child is about to make a purchase or trade.
If you’re in the process of teaching your children about the fundamentals of personal finance, here’s what you need to know—and how Greenlight can make the process not only easier, but also more fun.
Why parents should teach children about financial literacy
There are many good reasons for parents to teach financial responsibility to teenagers. Financial literacy is an important skill for teens to learn, whether you’re helping them build their first budget or compare college scholarships and loans. By teaching children how money works, you give your kids the kind of practical skills that can someday help them establish good credit, achieve financial independence and provide for a family of their own.
How to use budgeting as a financial tool
It’s never too early to teach your children about the benefits of budgeting. Many parents start by teaching children how to divide allowance and birthday money into three categories—spending, saving and giving. As kids get older, this budgeting tool can be expanded to include questions like “how much of your allowance do you need to set aside today to buy holiday gifts next month?” Some families use milestone events, such as a trip to Disney World, to help their children learn about the power of planning ahead.
When you teach your children how to budget, be prepared for them to make mistakes. It’s difficult to know how much money you need to set aside for the future, and your kids may end up making purchases now that they might regret later. That’s fine—in fact, it’s an excellent teaching tool, and a lesson that’s much better learned as a teenager than as an adult!
What your children can learn about saving
Budgeting is an excellent way to help your children understand the basics of allocating and spending money—but it’s also worth teaching your children about the long-term benefits of saving and investing. Setting aside a little extra cash for new school clothes is one thing; putting money away for years to take advantage of compound interest and investment returns is another.
The best financial tools for kids and teens—including Greenlight—incorporate both saving and investing as learning goals. This gives you the opportunity to pass important financial knowledge on to your children, even if you haven’t been much of a saver or investor yourself. It’s also a great way for you and your teen to learn new financial skills together.
How to introduce your teenager to their first credit or debit card
Building good credit is an essential financial skill. People who have a FICO credit score of at least 670 are more likely to receive lower interest rates on mortgages, credit cards and loans—and your child’s credit score could eventually affect their ability to rent an apartment or get a job.
This is why it’s important to help your kids build credit from an early age. Some parents decide to add their teenagers as authorized users on their credit card accounts, allowing their children to piggyback on their own good credit. Other parents start their kids off with a debit card—an important financial tool that can help kids learn how to make purchases online and in person without running the risk of taking on debt.
The best debit cards for teens give your children the freedom they need to make their own spending decisions, with enough safeguards in place to prevent them from making serious mistakes. In fact, a debit card might be the best option for parents teaching financial responsibility to teenagers. By getting your child used to using debit at an early age, they’ll learn the budgeting and balancing skills required to manage their first credit card.
Plus, your child will be eligible for a debit card many years before they’ll be able to take out their first line of credit. Most lenders won’t issue credit cards to people under age 18, which gives your kids plenty of time to practice with debit before graduating to a starter credit card or a student credit card.
How Greenlight’s debit card could help your teenager’s financial journey
Greenlight’s debit card for kids empowers parents to teach money management and the power of saving—while giving teens the tools they need to begin the journey toward financial responsibility. Greenlight is one of the best debit cards for kids on the market, giving your children the ability to make purchases, save for the future and learn the basics of investing. It’s also one of the best debit cards for parents, giving you the ability to set spending limits, monitor and approve purchases and link allowance deposits to completed chores.
What makes Greenlight one of the best debit cards for teens? With Greenlight, your teenager has the ability to use debit both in person and online—and you have the ability to monitor every transaction. According to Greenlight, it’s the only debit card that lets you pick the exact stores where your child spends, enabling you to set limits on how much your teen can put toward gaming, clothing or any other shopping category.
Plus, Greenlight can teach your teen the importance of saving and investing. All Greenlight plans include a Greenlight Savings Reward of up to 2 percent on money set aside for General Saving or put toward a specific Savings Goal. If you upgrade to the Greenlight + Invest or Greenlight Max plans, your teen gains access to Greenlight’s exclusive investing platform, giving them the opportunity to make small investments and learn about risk and reward—and parents have the opportunity to approve every trade.
The bottom line
Helping your teen learn financial literacy skills is an important part of being a parent—but parents teaching financial responsibility to teenagers don’t have to do it alone. When you use tools like the Greenlight Debit Card for Kids to help your teen learn the basics of spending, saving and investing, you give your child the tools they need to navigate our modern financial world—swiping, tapping and checking their debit card app just like Mom and Dad!
Plus, teaching your children about debit now can make them better credit card users later—and since good credit is such an important part of one’s overall financial health, learning these kinds of financial lessons at a young age could set your children up for a solid financial future in the years to come.