How Parents Can Help Teens Manage Money

Teaching teens how to manage their money is a critical skill that can be passed down from mom and dad.  And they need all the help they can get.
You would be surprised how little the average teen knows about how to allocate money.  Until they have their first job, they’ve never thought about budgeting their money, how to balance a check book or really what it takes to pay for all the cool stuff mom and dad have gotten them.  Some that work don’t develop this skill either.  This is where you come in.
Whether it is an allowance, or the money they get from their first job, use this opportunity as a teachable moment.  I always recommend teens split their money in thirds with some set aside for charity; 30% to contribute to household expenses, 30% for spending and having fun, 30% for savings and 10% to a charity for those in need.
I think it is important for teens to realize early that a portion of the money they make go for things that are considered obligations, just like it will be when they are adults.  Things like rent, insurance, utilities are obligations every adult has and the earlier a teen learns this, the better.  I feel they should be asked to contribute 30% of what they make to household expenses.  They should be taught this goes to things like the rent/mortgage which benefits the entire family.  This is one of the steps in what kids jokingly refer to as “adulting".
They should also be taught to save away a good portion of what they make.  This is a good teaching tool which can instill responsibility and the habit of saving for a rainy day.  Parents can teach them how to open an account at a bank or credit union and how to move money between a checking and savings account.  If they have built up a good amount in savings, they can consider opening up a college savings account like a 529 Plan which can be used to pay for college.  A huge benefit of this type of account is that any investment gains are tax free for use in higher education. 
Of course, all work and no play is no fun.  Teens should be able to spend a portion of what they have on anything they want.  This can include money for the movies, new sneakers, clothes etc.  They can also set money aside for something they want that takes some time to save for.  A car for example.
I also think it is important a portion go to charity, to the less fortunate.  They will learn there are quite a bit of people in need in this day and age, even in their own community.  Kids will feel good about making a difference.
Teens need boundaries and guidance and need to be taught skills for things they haven't had to do before.  Managing their money is one area they could use some assistance. You can help.
The opinions voiced in this article are for general information only and are not intended to provide specific advice or recommendations for any individual. Carefully consider your investment objectives, risk factors before investing. Investing involves risk, including the possible loss of principal. Diversification and asset allocation may not protect against market risk. Nothing in this article is intended as legal or tax advice. Please consult with your independent legal or tax advisor to seek advice based on your particular circumstances. For a list of states in which I am registered to do business, you can visit www.adviserinfo.sec.gov and search for my name, Alexis Hongamen.

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