Money Management for Teens: 7 Tips from Financial Experts

"It’s important to make the distinction between theory and practice or textbook versus experiential learning. We tend to forget how important experiential learning is in shaping our behaviours.

We can’t become financially literate just by reading about money tools and financial concepts. Financial literacy comes from practical experience — and that includes learning from mistakes.

Why prompting money mistakes in children builds financial literacy:

We tend to fear mistakes because we know from our experience that it can be costly. But kids need stepping stones. We can’t learn how to ride a bike without falling. It’s the same with learning how to manage money.

At 13 years of age, money mistakes are so much smaller, but the lessons are incredibly valuable.When you’re young, those errors aren’t catastrophic, plus they offer teachable moments. If we focus on practical, experiential learning, we can help our kids build their money muscles."

"The advice I would give to a teen is to learn how compound interest works, because it underlies every other major financial concept they’ll need to learn down the road.

When learning about saving, investing and retirement, teens need to learn that compound interest is a powerful force that can work for them — especially if they start saving early. On the other hand, compound interest will work against them in the case of credit card or other debt.

Learning about compound interest is a great way to understand that financial decisions can have long-lasting impacts and that teens would rather have compound interest working for them rather than against them.

At what age should young people learn to balance a chequebook?

Junior high is a great time to introduce the concept of expense tracking. Teens are mature enough to understand the concepts, and will hopefully learn good habits before they start driving and have a bit more independence.

These days, teens don’t need to learn to “balance a chequebook” in the traditional sense. Rather, they need to learn how to track their expenses, understand how to check a bank balance and understand that their money is finite."

"In general, Canadians have a high financial literary rate. But financial literacy isn’t one skill and learning to be financially literate and to manage money takes time, practice and awareness.

Our emotional relationship with money is an overlooked but critical factor in our individual financial success. Not only does it influence our mental health, but money matters are a leading source of conflict in our relationships with others.

Why it’s important to talk about money:

It’s not surprising. Talking about money is hard — and the money topic has been taboo for many earlier generations. But we need to start talking about money. Talking about money helps to remove the stigma and allows us to move beyond shame.

Having these conversations during our children’s formative years not only helps break the shame silence, but instills a belief that lessons are inevitable and just part of learning financial literacy.

Since building an open dialogue around money is important, parents can start by asking questions. Ask your children how they feel about what they spend, why they buy and what they want. Ask them how that purchase makes them feel and to reflect on whether or not they’d make the same decision next time.

Helping kids appreciate that feelings and money are linked helps them develop a healthy relationship with money."

"As a parent, it’s crucial to engage your teens in money conversations. Financial mistakes are usually made early in life and some of these decisions can have a big impact on your child’s future economic circumstances.

Talk to your teen about how and what they spend money on — and discuss your own financial decision-making with them. Getting them to make smart decisions all the time, isn’t the goal; the goal is to encourage your teen to ask money-related questions whenever they come up. Invite them to discuss household finances; ask them how to spend grocery money; talk to them about family vacations.

The idea is to nurture curiosity and a genuine desire to learn and expand their knowledge when it comes to handling money. Do this and their ability to ask for help — and avoid potentially crippling mistakes in the future — increases exponentially."

"Look at the money that you made and where it ended up. Ask yourself if you executed on your game plan, and if not, what can you do this month to stick to it. This evaluation will probably only take 20 minutes, but can get you thinking the right way about money and prepare you for adulting.

Where are teens wasting the most money?

I don’t believe teens really waste their money any differently than anybody older than them. The only reason they buy something they don’t need is because their money doesn’t have a specific job. If you don’t give each dollar a specific responsibility, it will quickly leave you. However, if you are diligent with your money and give each dollar a job when you splurge you aren’t really wasting anything."