This guide is sponsored by Greenlight. Its prepaid card for kids gives busy parents a digital way to assign chores, pay allowances and teach children the importance of earning, saving and giving.
While you can start teaching your children about money management when they’re young, teenagers are in an ideal position to practice what they’ve already learned in the real world. From buying a new outfit to going out to eat with friends, your teen likely has regular monthly expenses. Here are eight ways to help your teen make sound financial decisions.
Train your teen to become trustworthy and self-reliant adults by giving them responsibility. Start your child’s money-management education by providing a tangible source of income, such as giving them an allowance for completing chores around the house or helping them find a part-time job after school or on the weekends.
The goal is to give your teen a way to earn money and cultivate a sense of ownership so that they initiate the task — either going to work or tackling chores — not because you said so, but because it needs to be done. By giving them a source of income, you can also talk to them about the importance of having savings goals and encourage them to set one. For example, do they want to save up for a bike or car? Or perhaps a trip with friends?
If you’re not sure how to get started, use this calculator to assign chores, determine cost and help your teen visualize how much money they’d need to save each week toward their set savings goal.
Calculate how much to pay your kids for completing their chores by selecting your state, child's age, child's savings goal, and chore.
Which days will this chore be completed on?
| Chore | S | M | T | W | T | F | S | Rate |
|---|---|---|---|---|---|---|---|---|
| Add chores to work out weekly total | ||||||||
| Weekly total | $0 | |||||||
Your child is 0% toward their weekly savings goal of $0.
Chore rates are based on suggestions from experts. See our methodology.
| Mon | Tue | Wed | Thu | Fri | Sat | Sun |
|---|
If you complete all of your chores each week, you’ll make $0. This is 0% of your weekly savings goal!
Give your teen a comprehensive view of money through honest conversations about your family’s finances. “Consider including them in family budgeting discussions that might traditionally be kept between parents,” says Kalicia Bateman, personal finance editor at Best Company.
You want to show your teen that you aren’t a never-ending piggybank but an adult with different financial responsibilities. And you don’t need to omit the more complicated expenses from the discussion. “Allow them to see how you manage money and budget for large expenses, such as a vacation. They may not understand all the ins and outs of mortgage or credit card payments, but it’s important that they’re made aware of these types of expenses,” Bateman adds.
Explain that the purpose of a budget is to plan where your money goes so you can make informed choices about how much you can save and spend. Instead of giving your teen a budget that you’ve created yourself, have them sit down and make it with you. Teach your teen how to budget by having your teen design a simple budget in five steps:
Gather and total all revenue sources. Be sure to include any allowance and birthday gifts.
If your teen has a job, use their pay stub to explain what taxes are and how much is deducted from their paycheck. Explain that taxes help pay for community expenses like schools and road maintenance.
Some parents charge a “parent tax,” similar to Uncle Sam’s income tax, on allowances. This tax helps contribute toward the family’s general household expenses.
Separate your teen’s “wants” from their “needs.” Compile their monthly expense categories, including food, clothing and school supplies, and determine how much they spend on each item every month.
You may also include your child’s personal portion of bills that may be part of a family plan, such as cell phone bills or car insurance payments.
Subtract your teen’s total expenses from their income to calculate what’s left. If the budget has close to nothing left over or is in the red, talk to your teen about how they would like to increase their income or which areas they can trim down the budget. Be sure to balance a potential increase in workload against their other responsibilities, such as schoolwork.
While your teen’s budget is designed for everyday gifting and spending, don’t forget to put away some money into savings. Practical savings is ideal for a rainy day to cover unexpected expenses. On the other hand, long-term savings is a way to achieve big-picture goals, such as a car, college tuition or even retirement.
Once your teen starts setting aside money, look at savings accounts that can help increase their money. Though it may be worth looking outside of kids’ savings accounts. For example, high-yield savings accounts offer stronger rates and most allow you to open an account as a custodial. But if you’re looking for an all-in-one banking product that also teaches financial literacy and budgeting skills, Greenlight card offers 1% cashback and a 3% annual savings bonus when you upgrade to its Max plan.
Here’s what your teen’s monthly budget might look like if they earn $7.25 an hour and worked 18 hours a week:
| Income | Expenses | |
|---|---|---|
| Salary | $522 | |
| Taxes (10%) | -$52.20 | |
| Food | -$50 | |
| Snacks/Coffee | -$25 | |
| Gifts | -$25 | |
| Entertainment | -$100 | |
| Cell phone bill | -$50 | |
| Car insurance | -$125 | |
| Car fuel | -$75 | |
| Total income and expenses | $522 | -$502.20 |
| Leftover money | $19.80 |
A teen bank account is another way for you to teach your teen how to digitally manage their money without piggy banks or shoe boxes.
“Explain to them how a debit card works in connection to their checking account and teach them how to write a check, even though they’re rarely used these days. Have them monitor their account through the mobile app,” says Claudia Gonzalez, financial advisor from Kovar Wealth Management. “This way they’re aware of how much money they have available to spend. It teaches them the basics of budgeting.”
Most bank accounts support direct deposit, so your teen can automatically fund their account with their hard-earned paycheck. Other bank accounts, like Greenlight, allow parents to use their own bank account as a funding source to make allowance payments.
With Greenlight, you maintain control over your teen’s money while allowing them to spend, save and even invest their hard-earned cash. The Greenlight card also comes with a chores and allowance tracker, a savings reward of up to 5% and for Greenlight Max and Infinity plans, an additional 1% cashback for extra savings.
As your teen’s income and spending habits change, you’ll want to track their finances and make changes as needed. For example, the Greenlight card sends you real-time notifications every time your teen uses their card. And you can conveniently view your kid’s transactions to find teachable moments to tweak spending habits and budgets.
And if needed, Greenlight lets parents set ATM cash withdrawal and spending limits for specific stores to help teens stick to their budget.
On top of teaching your kid how to manage their money, you may also want to kickstart their financial journey by building their credit history. If your teen has demonstrated that they’re financially responsible, consider adding them as an authorized user to your credit card. Some credit card providers, like Capital One and Chase, report authorized users to the credit bureaus so your teen can get a headstart on increasing their credit score.
Remember that as their primary cardholder you’re ultimately responsible for all authorized charges on your credit card. Failure to pay off your credit card balance on time can negatively affect your credit history and your authorized user’s credit.
“If they prove to be responsible with its use, older teens may eventually get a low-limit credit card backed by their parents,” says John Longo, professor of finance at Rutgers University and the author of Buffett’s Tips: A Guide to Financial Literacy and Life. “Urge them to pay the balance off in full each month, and if it isn’t, consider terminating the card or placing it on a freeze until responsible credit behavior is established.”
Alternatively, you can skip the risk of overspending by opting for a secured-spending Visa card, like Step, that also helps your teen build credit but restricts spending to only what is in their account.
Use a parent-led loan for safe borrowing to help fund larger purchases that your teen may not have the funds for yet. Be sure to explain the terms of borrowing money, including paying back interest and monthly installments.
Some financial platforms, like FamZoo, allow parents to set a parental loan interest rate, track loan payments and monitor the loan progress.
For teens with advanced money-management skills who have mastered the art of saving, consider showing them how to multiply their money with investment accounts. The type of investment account can vary depending on your child’s interests.
Low-minimum brokerage accounts may be better for short-term financial goals with direct access to trade stocks and ETFs, while retirement accounts set up your teen for financial security down the line. But if your child is concerned about future education expenses, education accounts like the 529 college savings plan may be a better option. If you want your teen to have more control over investments, look at debit cards like Greenlight that allow kids to choose their own investments.
You can even open a custodial account for your kid to invest in crypto, though a few products are emerging that let kids open their own accounts with a parent’s permission.
The majority of parents who give their kid an allowance say that they’re putting that money away either in a savings account (42%) or in a physical piggy bank (19%).
Parents have many options to teach their teens about proper money management and healthy financial habits. Start by including your teen in your family’s discussions about finances and work your way up by giving them opportunities to practice spending and saving with child-friendly debit cards.
GoHenry is now Acorns Early. If you’re looking for a GoHenry alternative, try Greenlight, Step, Current, Modak Makers or Chase First.
Modak has no monthly fee, but it’s slim on features. Greenlight starts at $5.99 but is a value for big families.
Modak is a no-frills, free debit card for kids and teens that comes with a virtual or physical card and the ability to set up direct deposit.
Some of the best free debit cards for kids that don’t charge any monthly fees include Step, Current, Cash App, Axos, Chase, Revolut and more.
Kachinga is a kids’ prepaid card with chores and allowance features, but it comes at a cost.
Step banking accounts help kids and teens learn to manage their money while building their credit scores.
Teach your child financial responsibility with this reloadable debit card that comes equipped with parental controls.
Compare the best kids’ prepaid and debit cards designed for ages 13 and under.
See our first-hand review of the Greenlight card to see if the $5.99 monthly fee makes sense for your family.
Our list of the best credit cards for teens includes Step, Greenlight, Capital One Quicksilver and more. See the full list here.