3 Financial Concepts to Teach your Teen

Ever made a money mistake and learned a lesson the hard way? Chances are, you have – and your teenage son or daughter won’t have the knowledge that comes from experience to avoid making the same misstep. Be sure your teen is ready for the unexpected by helping him or her to prepare for it.

A recent report by CNN  said nearly 6 in 10 Americans don't have enough put away in savings to cover a $500 unplanned expense. However, a more encouraging sign also emerged from the report – of the groups of people surveyed, millennials were the most financially prepared to deal with an unplanned expense. 47% of those aged 18 to 29 said they could use some of their savings to cover an unexpected financial hurdle. This trend indicates that more and more young people are becoming financially savvy. 

As a parent, here's where you come in – you can help your teenager avoid mistakes (some of which you might have made yourself) and be financially ready to deal with whatever life hands them. Here's a list of three quick things you can start doing together!

Start putting money in savings  consistently

Getting a checking and savings account is of course a good first step, but that's just the start. Once your teen starts earning money, work out a plan in which a certain amount of each payment (for mowing the lawn or chores around the house) is set aside in their savings account. As an adult, it's a great idea to do the same with each paycheck. For your teen, this can be a great introduction to saving and budgeting. For you, it can help ensure you're prepared to take on any unforeseen expenses. 

In addition, consider putting some money aside to give back to a worthy cause or charity. We always encourage our members to give back to the community, so getting an early start on this can be a great thing from both an emotional and financial perspective.

Pay bills on time

As adults, experience has taught us to pay bills on time. Be sure your teen is also aware of how important of a step this is to being financially independent. 

When your teen gets his or her first cell phone, for example, setting up automatic payments on the account is one way to help ensure payments will be made on time. Your teen will need to remember what day the payment is due, and also remember not to overspend before that payment hits the account. Be sure to remind your teen of an important fact: late payments can stay on your credit report for seven years. 

Establish a credit history

Your credit report is an important part of your financial wellbeing. A solid credit history of on-time payments means creditors and lenders will be less hesitant to approve you for loans and other types of credit down the road. Not only that, but having a good credit history can result in a score that makes it significantly easier to find an apartment, or even find a job.

  • Credit card utilization
  • Derogatory accounts (such as serious delinquency, tax liens, or collection accounts)
  • Length of credit history
  • Total accounts
  • Number of credit inquiries
  • Type of credit accounts (car loan, credit card, store card, line of credit, mortgage, etc.)
  • Having your teen open a Share Secured or CD Secured personal loan. This option allows your teen to “borrow” against their own funds and make monthly payments to build credit. 
  • You can also consider adding him or her to your credit card account as an authorized user. You'll still remain the primary account holder, and you can revoke access at any time. Be sure to check with your individual lender – not all lenders report authorized signers to the Credit Bureaus. 
  • Is your teen in the market for a vehicle? Another option to help your teen build credit. You might also consider being a cosigner on your teen's first auto loan. But remember, if payments aren't made on time for either of these it'll negatively affect both you and your teen. 

Reminder: Your teen must be 18 or older to be eligible to be on any loan products.

If you're not quite ready for that, it's okay. But remember – when it comes time to test the waters of financial independence, such as when your teen leaves for college – it's a good idea to at least introduce them to the concept of a credit card. Giving your teen a credit card “for emergencies only” in college without any prior exposure to using one is probably not an ideal scenario for either of you. For more information on credit scores and what goes into them, read this article about building credit


With your guidance, your teen can become financially responsible at an early age. Following these steps is a great path to achieving financial independence by the time he or she leaves for college, or wherever life takes them. 

Questions? As always, we've got answers. Give us a call at 800-233-2328, or visit your friendly Neighborhood Financial Center.