Managing money effectively is important for everyone, especially teens who are just beginning to understand financial independence. Whether they earned money from a summer job or an allowance, it’s essential for teens to understand fundamental concepts of money management. Learning how to handle money wisely is a crucial life skill that can help pave their way towards a secure financial future.
Learn the basics of money management
Before diving into specific strategies for managing money, it’s important to understand these broader concepts:
Budgeting: Tracking income and expenses is the best way to ensure that you don’t spend more than you earn. A mobile banking app can help teens keep track of any money coming in and where each dollar goes, right on their phones. This habit helps in making informed financial decisions.
Saving: Setting aside money for future needs or emergencies is crucial. It teaches the value of delayed gratification and helps in building a financial “rainy day” fund.
Spending Wisely: Differentiating between wants and needs is challenging – for everyone! What is a need can become a want or vice versa depending on life circumstances. For example, you might need a couple pairs of shoes, but you might want ten pairs of shoes. You might need a car to get to work, but you want a new car with navigation and upgraded sound system. Prioritize your spending on essentials and avoid impulse purchases. When in doubt, sleep on it and see if that item still has the same appeal the next day or week.
Opening a bank account is one of the first steps towards financial independence. Courtesy First Fed
Open a teen bank account
Opening a bank account is one of the first steps towards financial independence. First Fed offers both checking and savings accounts designed for teens.
First Checking: If your teen would benefit from a debit card to pay for meals or unexpected expenses, then a First Checking account is an ideal solution. The debit card is attached to a checking account where the teen can set up direct deposits, make mobile check deposits, or use payment apps like Venmo. First Checking is available to teens 13-20 with no monthly maintenance fees.
First Savings: Keeping savings in a separate account helps teens work towards their financial goals and establish better money management skills. Also, a First Savings account from First Fed earns 3.00% APY (Annual Percentage Yield) on balances to help teens reach their financial goals faster. First Savings is available through age 17 and offers zero monthly maintenance fees on the account. View more information here.
Having clear financial goals can motivate teens to manage their money effectively. Courtesy First Fed
Set financial goals
Now that they are equipped with basic money management tools, having clear financial goals can motivate teens to manage their money effectively. Goals can be short-term (like saving for new clothes or electronics) or long-term (like saving for college).
Define Goals: Write down what you want to achieve financially, whether it’s saving for a specific item or boosting savings. Be specific about the amount needed and the timeframe.
Create a Plan: Break down the goals into manageable steps. For example, if you want to save $200 in six months, determine how much you need to save weekly or monthly based on your allowance or other source of income.
Track Progress: Regularly review your goals and adjust the plan as needed. Celebrate milestones with smaller treats along the way to stay motivated.
Skills for the Future
As teens graduate from high school and head into college or careers, the fundamentals of money management they learned will help them navigate the more complex world of adult finances. For example, using a debit card and tracking purchases can help manage their first credit card more responsibly. With the right tools and mindset, teens can master money management and set themselves up for long-term financial success.
First Fed is a member FDIC and equal housing lender.
