As my kids have entered the teen years, it’s become increasingly difficult to suggest what they might like for a birthday or holiday gift when well-intentioned relatives ask. Of course, the one item that always fits and never disappoints is a check, so that’s often what they get.
The only downside? Sometimes those checks sit around for a while as I try to figure out what to do with them. Should I deposit them in my account and let my kids pocket the cash? Deposit some or all of it in their college account? Or maybe use it towards an upcoming school trip? And speaking of school trips: how do I send my kid safely out of town with money? Potential holes in his pockets cause me some concern. Clearly, I have questions.
Teaching children money management is never easy. It’s a critical life lesson that should start early, but definitely gets more challenging as kids become teens—and their wants outpace their paltry income.
In my search for answers, I called in an expert. John Durrant, Executive Vice President of Retail & Direct Banking at Capital One, is not just a financial expert. He’s also the dad of two teens, which means he feels my pain. Here’s the advice he gave me on how teens can manage money.
How to Teach Teens to Manage Money
Seize the opportunity NOW
You’d never consider letting your children in a pool without knowing how to swim; yet going out in the world without financial literacy can be equally scary. According to Standard & Poor’s Global Financial Literacy Survey, the United States’ financial literacy rate is only 57% — and many high schools across the country lack coursework on the subject.
“There’s no better time to gain experience managing money than during the teen years,” says Durrant. “It’s an age when the consequences of making a few mistakes are manageable, and the desire to practice and learn is high.”
“Can I” vs. “Should I”
Durrant recommends turning gifts and allowance into money management conversations. Specifically, shift the discussion from “can I have?” to “should I get?”
“The biggest difference I’ve seen as my children get older is around their interest and ability to think ahead. When they were eight or nine, they were much more likely to make an impulse purchase on something they might forget about a week later,” says Durrant. “Now, as teens, they think much harder about whether or not a particular purchase, like a pair of sneakers, is really worth it. They consider saving up for more expensive items and think about how the purchase impacts their ability to save for the future.”
Give them some practice
Learning by doing is a big motto in our house, and the tactile nature of spending paper money can be invaluable for learning how cash works in the real world. But, it’s not always practical. Of course, neither is handing over my credit card. So how do we give our teens experience in managing their money while maintaining some safeguards?
Durrant suggests utilizing a teen-focused checking and debit account, in tandem with a savings account. “Capital One’s Teen Checking & Debit Card is designed to help teens experience money management firsthand. It gives teens the freedom to make their own money choices while parents maintain full visibility into and control of the joint account. It provides a safe, parent-supervised way for kids to learn by doing and deciding what they spend and what they save.”
Capital One’s Teen Checking Account also gives teens experience with online tools they’ll likely use the rest of their lives. “They can learn how to manage their own money digitally, including how to set spending and savings goals. This means moms and dads can also stay connected to their teen’s financial habits,” Durrant explains.
And, because the debit card must be backed by cash in the account, it’s easier for parents to control spending with online tools like a debit card lock, money transfers, and merchant restrictions. (Phew! I feel better already.)
Share your wisdom
Once you see how your child is handling money, you can give them more targeted advice. Are they doing great? Recognize these efforts. Spending too much on café lattes? Talk about it.
“Focus the spending/saving conversation on the tradeoffs around potential purchases,” suggests Durrant. “Share the values that guide your own decisions around money.” For example, does your family value experiences over things? What financial mistakes do you want to help your teen avoid?
“I’m a big believer in giving teens opportunities to build their financial muscles,” says Durrant. By starting now, while they’re under your roof, “Parents can encourage smart decisions and instill positive financial habits that last a lifetime.”