Updated: Sep 04, 2023

8 Tips to Teach Your Teen Smart Spending

There are many ‘talks’ parents are expected to have with their teen before they enter the real world. Lately, the ever-increasing debt problem in the U.S. has prompted parents to start discussing f...
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There are many ‘talks’ parents are expected to have with their teen before they enter the real world. Lately, the ever-increasing debt problem in the U.S. has prompted parents to start discussing finances with their children.

Here are eight tips to keep your child out of credit card debt and get them started on the road to smart spending.

1. Get a Credit Card

This may seem like the exact opposite of what the first step should be, but used correctly, a credit card early in life can help your child later when it comes to making big purchases.

If you are good with managing money you can open a credit card under your child’s name and use it for small purchases you pay off quickly such as groceries and gas.

This should be the only reason your child has a credit card to their name. Credit cards generally are not necessary for teenagers and can enable bad financial habits at a young age.

2. Open a Savings Account

It can be very rewarding to watch a savings account grow. By opening one up for your child they will be able to start keeping track of their own finances.

A checking account that can be accessed by a debit card is a safer alternative to credit cards. This way your child will not be spending money that he or she does not have.

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3. Put Your Kids to Work!

A part-time job is a great way for your child to learn some independence and responsibility while still living at home. Having a part-time job as a teenager not only provides your child with a little extra spending money, but also can teach a lot of valuable lessons.

Starting a job at a young age will help your teen appreciate the value of a dollar and will also promote smart spending habits.

Another benefit of finding a part-time job early on: Your child will have work experience going into college, which will help once the real job search begins.

4. Encourage Them to Use Cash

When your child uses plastic to pay it can be hard to see how much money is actually being spent.

By using a certain amount of cash each week as a personal allowance it will help your child budget a spending limit. Establishing spending limits early can engender positive habits in the future.

5. Have them Create a Budget

Whether they have money from birthday presents, a job or allowance, your child should still make a budget for spending. Although their method of making money may not come with regular deposits, they can still have a budget.

If your child does not have expenses such as gas or books, they should still limit their spending to make sure they are putting in more money than they are spending.

6. Watch What They Spend

It can be difficult to find the balance between cool parent and responsible parent. Teenagers are on the constant hunt for more freedom and monitoring their finances may seem like an unnecessary — and unwanted — measure.

By observing where your kids choose to spend their money you can find more cost-effective solutions.

For example, if you see that they are spending on unnecessary items, i.e. a $200 shirt that will be "out of style" in a week, you might suggest a better investment for the $200.

You can even empower them to balance their checkbook or do something as simple as keeping receipts to keep track of how much money they have spent. By keeping an eye on their spending habits you can make sure to stop any poor habits from forming.

7. Have Them Make a Wish List

A popular hang out for teens has always been the mall, but with the abundance of stores the temptation to spend money is endless.

If you encourage your teen to make a list of things they want or need to buy, they will be more likely to save money as opposed to spending it on impulse purchases.

8. Set a Good Example

Teenagers often are running out of the house to make it to their next social adventure, but that does not mean they aren’t taking notes.

As they start making money, many teens are going to use their parents as reference for what to do with that money.

Even if you have had financial troubles in the past, this is the best time to make some changes yourself. What better reason to turn things around than to be a role model for your child?

Being a parent is a difficult but rewarding job. A big part of parenthood is planning for your child’s future.

While you cannot control everything, making sure your child is prepared to take care of their own finances. It is one of the most useful lessons you can teach them.