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Ages & Stages

Managing Money

Money management skills are acquired through trial and error, and the sooner the lessons begin the better. Waving kids off with “Money doesn’t grow on trees” doesn’t get them thinking critically about setting priorities and making tradeoffs. Neither does opening our wallets to hand over another twenty.

The goal should be to cultivate an attitude that values responsible spending, long-range planning, and generosity. A fundamental principal is that there’s a difference between what you want and what you need. When instant gratification is expected, nothing feels special and even abundance doesn’t seem like quite enough.

Tips For Building Money Management Savvy in Your Teen

    • When children have their own money to manage — whether it’s a weekly allowance, a clothing budget or a set amount of spending money for vacation  — they gain control over their financial destiny.
    • Give an allowance to build money management skills rather than in exchange for chores. Instead, establish an expectation that everyone pitches in around the house. Then let your child earn “extra pay” for bigger jobs, such as washing the car or cleaning the basement.
    • Once you set the expectations for your child’s allowance, step back. You want your child to experience both the pleasure of spending well, as well as the letdown from wasting money.
    • Children learn about thriftiness and generosity when they see their parents forego something because they want to put money aside for vacation or make a donation in a friend’s memory.
    • Because credit cards target young adults, it makes sense to introduce your adolescent to the pros and cons of plastic before he falls for a sign-up offer as a college student. A first step is to allow your child to have a debit card linked to a bank account because it reinforces that you can only spend what you have.
    • Monitoring is key if you decide to give your adolescent a credit card. Review monthly statements as a basis for deciding whether the privilege should be extended. You want your teen to learn from poor choices,  but you don’t want to have to bail your teen out of debt. A reasonable step is to give your child a pre-paid credit card, which puts a cap on spending. Make sure he knows about interest and the fees and penalties of late payment.
  • Let your child see your financial brain at work. Show her how you come up with a household budget, write checks, pay bills on line, make payments to your mortgage or student loan, look for bargains, and use coupons.
  • Use the Internet to teach comparative shopping skills. When your teen needs a big-ticket item, encourage him to look on line for pricing. After he’s narrowed the choices, then either go store shopping or order on line – teach him to consider travel expenses versus shipping costs.
  • Give a clothes budget. Rather than debate every item, set an amount and tell her what she has to spend for back-to-school clothes. Your daughter can buy expensive jeans if she likes, but she’ll learn she won’t have much left over for other items.
  • Make lists. When we go to the store without a list, we buy stuff we don’t really need, and come home without an item needed for dinner. Teaching kids to make lists helps them prioritize their spending.
  • Support causes as a family. A home that commits to charity is a home that understands it has blessings. Encourage your child to identify a cause she’d like to support, then find ways your family can make a donation. Perhaps you skip pizza night, or you can sacrifice something that is wanted but not needed.
  • Consider having older teens budget for a year. Guarantee food and housing, but have him create a budget for transportation, clothing, entertainment, snacking, etc. Put money into a bank account for him to manage. If he runs out of money, he won’t starve or be homeless, but he’ll learn the lesson of savings. He’ll also learn that if he wants extra money, he’ll need to work.
  • Get a job? Working can help a teen understand the value of money and develop practical and interpersonal skills.  However, research demonstrates that teens who work more than 20 hours per week may be less likely to succeed in school.

Bottom Line: If a person has to wait until adulthood to learn to manage money, she likely never will.

Last Updated
Excerpted and edited from "Letting Go with Love and Confidence: Raising Responsible, Resilient, Self-Sufficient Teens in the 21st Century." Kenneth Ginsburg and Susan FitzGerald. Avery Press, Penguin Books, 2011
The information contained on this Web site should not be used as a substitute for the medical care and advice of your pediatrician. There may be variations in treatment that your pediatrician may recommend based on individual facts and circumstances.
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