4 Things You Should be Letting Your Teens Do with Their Money (and 1 You Shouldn’t)

Categories: General Tips

As your kids start getting older and earning more money for themselves, it can be difficult to discern what you should let them do with their money and what you shouldn’t allow. How can you encourage them to develop good financial habits but also prevent them from making big mistakes? We’re talking you through four things you should consider letting your kids do with their money, and one you probably should avoid. 

1. Open their first checking account.

A checking account is an easy way for your teen to start their financial journey. If your teen gets an allowance, is already making money from a first job or just gets some regular “walking around” money from Grandma, it’s a good idea to sign them up for a checking account so they can access that money and learn first-hand about managing their finances. Many youth accounts are “attached” to a parent or guardian’s account, so you can help your kids manage their money while also giving them the autonomy that comes with their own account.

2. Use a debit card. 

When your teen gets that checking account, make sure they also get a debit card. Having a card tied directly with their money will teach them the discipline of not spending more than they have just because they’re using “plastic.” You can use this as an opportunity to teach them how to use the card reader, when they have to use a pin or sign, and other key elements of debit card use–for instance, teaching them the difference between using their PIN and running their debit card as a credit card. The convenience of a debit card comes in handy for teens who might not know exactly how much they’ll spend on that mall trip or meal out with friends. As long as they know how much is in their account and their spending limits, using a debit card will make life much easier. And parents can stop worrying about their teen carrying around large sums of cash.  

After they get used to using the debit card and turn 18, it’s a great idea to let kids apply for their first credit card, potentially with you as a co-signer. They can start making purchases, paying the balance off regularly, and build credit. It can be a nerve-wracking experience, but the skills and knowledge they’ll gain from managing a credit card themselves will make it totally worthwhile. 

3. Actually spend money.

Yes, you should let your kids actually spend their money. Sure, encourage them to save, budget and invest, but they have to have a little bit of spending money for fun too. After all, it’s their money that they earned. You should be having direct, honest and transparent conversations. Teaching financial responsibility will give them a strong foundation to let them spend their money in responsible ways. But, keep in mind that they are still young and will likely make a few mistakes along the way. Remember, it’s not the end of the world if your teen buys an expensive pair of jeans and then either regrets it or they get ruined on first wearing. Learning from small financial “mistakes” will help them prevent more dire ones as they get older. You can help prevent serious issues by leveraging card controls and monitoring their spending on mobile/online banking apps with them.  

4. Use a budgeting app.

Some parents may be concerned about the security of apps that have you connect your account and credit cards, but their value is tremendous (and most have security features). Kids can learn so much from using all the support your local financial institution can give them. You should encourage budgeting, even if it is in a way that you might not be accustomed. Learn more about budgeting and see our sample budget trackers here

And the one thing you shouldn’t let them do?

5. Spend beyond their means.

It’s good to let your kids have some financial freedom–especially if they’re working part-time and have earned a little spending money. But try to keep them relatively reigned in. You don’t want them to rack up credit card debt because they get in the habit of making impulse buys, especially on credit. Encourage them to have text alerts on their accounts so they can proactively stay on track. If you’ve set a good example for them, they’ll likely already know that they shouldn’t spend beyond their means, but having an honest conversation about that helps too.