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Teen Health and Safety

6 Ways to Teach Your Child About Responsible Spending Habits


Dr. Billy Hensley

President and CEO, National Endowment for Financial Education

From drugs and alcohol to sex and social media, parents need to have these conversations with their children to help keep them safe. What about financial security? Money still seems to be a taboo topic. Some may shy away from discussing finances with their kids because they don’t feel they are good at managing money themselves. However, parents must overcome their resistance. Here are 6 tips for covering the financial basics with your child.

1. Working with a budget

Show your teen how the family budget works. How you keep track of income, expenses, and live within a spending plan. Let them know it takes time and to be patient. Take note of how your child handles needs and wants. When spending decisions arise talk about prioritizing goals.

2. Earning a paycheck

If your teen is working a part-time job, review their paystubs with them pointing out how taxes affect their take-home pay and how the things they buy compare to hours spent working for them. Teach your teen the importance of paying themselves first. Setting something aside from every paycheck will boost savings. More importantly, it establishes a healthy lifelong habit that will be important in the long run.

3. Managing an account

Shop for an account with the smallest balance requirements and the lowest service charges. Some banks and credit unions offer special deals like free debit cards, checks or ATM use for students and young adults. Once your child opens an account, make sure they know how to keep track of their spending and understand fees like minimum balance requirements, overdraft charges, teller visits, and charges to use an ATM not owned by their bank. Work with your teen to reconcile their account for the first few months.

4. Get saving Teaching Your Teen the Money Basics for a Positive Future

Once you’ve chosen a bank, you and your teen should set up an emergency fund. Bad things happen — it might be a costly car repair or a blown computer hard drive. A few hundred dollars is a good start, but don’t stop putting money away in a separate, interest-bearing account that’s easily accessible. Also, be aware of minimum balance requirements. Starting a savings account is a great time to introduce the magic of compound interest. A 15 year-old who invests $2,000 a year in a Roth IRA for just five years — until age 19 — will have almost $1 million tax-free at age 65, if the account earns a little over 10 percent. Sure, this example is based on a high rate of return, but it also illustrates the importance of saving early.

5. Using plastic

Credit cards are an important tools to help establish credit. Make sure your child understands that purchases made via plastic are loans. The price for the loan is the interest, and it can be very high, especially if the borrower pays only the minimum each month. Keep spending within reason and remember, one credit card is enough.

6. Keep the conversation going

Help your teen continue financial education through online websites (like, classes, camps, etc. Gradually build on each of these areas, as your child is ready to absorb more complex information. Habits form early, so remember to have these conversations with your child early and often.

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