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Money Management for Teens: 5 Money Habits for Financial Success
Youth & MoneyAugust 1, 2024
Financial habits are formed at a young age. When you shop with your kids, they notice how you handle money – whether you buy things on a whim or save for important items. By the time your kids are teens, they’ve already got a few ideas about the importance of money, and how (or how not) to use it. However, it’s never too late to set your kids up for success by teaching them smart money management skills.
Here are five money management habits that can help set teens up for success:
1. Save money instead of spending it. Teens, like adults, are bombarded with ads every day – especially while scrolling through social media. Exercising control and financially taking care of your future self is a key skill for teens to learn. Always giving into temptation and making impulse purchases can lead to empty bank accounts and mounds of debt. Encouraging your teen to set aside a certain amount of money on a regular basis instead of spending it can help build their savings.
2. Weigh the opportunity costs of every purchase decision. Opportunity costs are what you give up to purchase something else. For example, buying a shirt for $25 means you may not have money to go out to eat with your friends.
Consider teaching your teen that they are in control of the decision-making process. This includes weighing all the costs of their purchases to determine if they’re making the best decision for their future. Making good time management decisions is another key skill for teens to learn as they enter the workforce. After all, once they start working, there is a dollar amount attached to their working hours.
3. Set S.M.A.R.T. financial goals. S.M.A.R.T financial goals are goals that are specific, measurable, achievable, realistic, and time bound. Setting a financial goal of “I want to save money” is a good idea in theory, but in practice, it doesn’t identify the purpose for saving money, or the date it’s needed by.
Making savings goals specific, such as “I want to save $400 for a mini drone in eight months,” is more action-oriented and will help your teen be more motivated to track and achieve their goal by the timeframe they set. It’s okay to change their goal and use the money for something else if their priorities change. The important thing to remember is that they’re saving it for a specific purpose.
4. Don’t spend more than you make. Not spending more than you make is an important lesson for teens to understand. It’s easy to want to “keep up with the Joneses” and fall into the trap of buying the biggest, the best, and the most expensive version of everything just to match other people’s lifestyles.
For many teens, who may not earn much at part-time jobs, babysitting, or through weekly allowances, this can be difficult. Even though teens don’t have regular bills or significant financial decisions to make, learning to live within their means at a young age will help set them up for success when they’re adults.
5. Use money as a tool. While money matters, it isn’t the ultimate goal, and if we base our happiness on it, we’ll never be truly happy. Yes, we need money to live. However, we should use it as a tool to help shape the way we want to live our lives.
Your teen can do this by finding ways to make extra money, saving to reach financial goals, and investing wisely. The important thing is to always keep money in perspective: that it’s just a part of life, and not the be-all, end-all of a happy, fulfilling life.
Teen Savings and Checking Accounts at GLCU
Forming great money habits early on will help your teen learn how to live a financially stable life now and in the future. Smart money management skills and a healthy attitude toward finances can set your teen up for success when they reach adulthood.
This blog was based on GLCU’s Adolescent$ five-part video series designed to help teens and young adults learn good money habits. Watch the video series here. Interested in opening an account for your teen? Learn more about our Adolescent$ and youth accounts.
The information in this post is for educational and informational purposes only and does not constitute investment advice. You should consult a licensed financial advisor before investing in any financial product or service.