25 answers

How to Manage Teen's Finances

Hi everyone...I have a son who is 16 1/2. He has his own bank account. Up until now I have made him SAVE half of all money he earned for a job, got for birthdays, or even his child support (which I receive from his father). The other half is HIS to spend on movies, eating out or whatever. Well now he has a car and must pay insurance, gas, repairs...so my question is...I told him that the money in that account is for GAS or REPAIRS only...should I let him have the debit card all the time...or should he have to request access to his own account?
I feel like he should be responsible enough to handle this...but half of me is leary! any input would be great!

What can I do next?

So What Happened?™

Hi everyone!
Thanks so much for your GREAT responses! I have taken a little bit from each and everyone and blended them together for the ultimate answer! We have decided to open a savings account and he will now deposit 25% of any birthday, child support, paychecks into it! Then the other 75% goes into checking from which he will have gas money, insurance money and spending money. He will hold onto his debit card and we will review his receipts and checkbook weekly as well as when statements come in. This week he got a taste of the REAL world when he had to drop 250.00 on his car for repairs...he actually paid for his own haircut and purchased himself some clothing this week. So I really really want to thank all you super Moms and Grandmoms out there for your superb advice! Have a great weekend!

Featured Answers

My approach is to let my 17 y.o. daughter use her debit card and manage her account, while trying to keep an eye on the bank statements, so as to be safe...

1 mom found this helpful

Do you have on-line access to his account? This will allow you to provide him the opportunity to make responsible decisions. You can pull it away if you see him making poor financial choices.

1 mom found this helpful

I have only a 5 year old and a baby...so I'm not experienced with teenagers. But I think you should give him the card all the time. You should be able to see the account online and will know if he is spending it where he shouldn't. It will teach him responsiblity. In only two short years he'll be an adult...plus it'll be good for him to have the card in case of emergencies.

Just my two cents. Good luck!

1 mom found this helpful

More Answers

Hi,

Have him put the money that he is saving in a Money Market account that isn't as easily accessible by a Debit card. He can transfer the money online into his debit card account as needed for those car needs. This can help to restrict his use of the money. There are some great online banks for this. Plus, he can gain between 3% and 5% interest on the money he is saving!
I have a financial coaching business. Feel free to contact me if you need any advice about yours or your son's financial needs. I am listed on the website!

1 mom found this helpful

Personally I think he should have to request it....sometimes kids dont understand the amount they have and think its like a credit card...you would hate to be stuck with overdraft fees. But it all depends on you and your childs communication. Maybe you can let him have it but the firdt time he messes up then take it. Good job on teaching him to save at an early age.

1 mom found this helpful

Do you have on-line access to his account? This will allow you to provide him the opportunity to make responsible decisions. You can pull it away if you see him making poor financial choices.

1 mom found this helpful

My college age son, went away to college spent of all his money before Christmas , his years worth of funding gone. I learned later this was not un common. I spoke with a financial planner, who explained that Parents want to get mad at the child, when in fact, we give them access without a plan, and they have no real experience. Having access means defining a plan for them to follow. How else would they know.
I should have told my son, for example. YOu have 1200.00, that means you can allow yourself, 100.00 per month, or 25.00 per week, if you stray from that your funds will not make it a year...
Not any different than adults seeking financial planning.
It is their first time, they need to have the plan spelled out for them. Do not assume it makes sense to them...

And they may fail a few times, but you need to keep teaching them....

1 mom found this helpful

I have only a 5 year old and a baby...so I'm not experienced with teenagers. But I think you should give him the card all the time. You should be able to see the account online and will know if he is spending it where he shouldn't. It will teach him responsiblity. In only two short years he'll be an adult...plus it'll be good for him to have the card in case of emergencies.

Just my two cents. Good luck!

1 mom found this helpful

I would recommend that you do two things - teach him to budget - and teach him how to STILL save -a difficult task I know!

I would open a money market account, and help him map out how much money he gets a month, and what that translate to each week. Then let's say he has $100 a week, and needs $50 a week for car insurance and gas. Tell him from whatever remains of necessary expenses, he should save 25%-50% (depending on how much he really has - no need whittling him down to $1 in spending money!) Put that in the money market, and then the rest in the checking account. Then, once a week, and then after a month or 2 go to every two weeks, sit down with him to review his online bank statement to make sure that he spending only the amount he budgeted for himeself.

Then explain to him that if he has a week he CAN"T work, and is down on money, his first step is to take money from his discretionary spending, and in an emergency, with your permission, he can make a withdrawl for the money market account. Plus, he can use a portion of that for dream purchases (the radio he has to have for that car, etc!)
Perhaps he can be encouraged by you matching a donation of $0.50 for every dollar he puts in the money market or something like that.

In that way, you can give him the debit card, let him use it pretty freely, giving him some rope to run on, plus some oversight on a schduled basis, that way he can look forward to your scheduled financial updates, and not feel like you are constantly questioning his purchases. On top of that, if he uses more money than he has in his account, and has accidently went into his budgeted money for necessary expenses, you can make him take a "loan" from his money market account, and pay it back by a certain date, with interest, so he learns how that works. He will therefore also see his dream item money get drained.

Yikes - this may have been confusing, but I think by making him him commit to saving a certain amount, no matter what, and rewarding him for that by matching at same level, and then learning to live on the rest, he will learn that saving is #1, and to only buy what he can afford with the rest of his income. Too many in America buy what they can afford, and then try to find some way to save what little they have left, instead of saving first, and then buying what they can affort on what is left. Especially the young with money burning a hole in their pocket!

1 mom found this helpful

maybe you could try getting him one of those cards that you fill every month with a designated amount and see how he does with that first. this way he can't take out too much inone month that he regrets it later. then month after month he will realize how far the money went and see what he has left over. and you can too.

1 mom found this helpful

Hi T.. I bank at Chevy Chase and my daughter also has an account there. I was able to put a limit on how much she can withdraw from her account, even with her atm card. You should see if you bank offers a similar option. You should also give him the chance to prove he can be responsible. I think sometimes we assume the worst of our children, he might surprise you and be an "adult" about his money management. Good Luck!

1 mom found this helpful

I would suggest that the savings account you have set up for your son since he was very young be savings for college and not be used to keep up his auto expenses, because that could become a black hole. He is still very young to own a car but since he has it, you are on the right track to expect him to pay for the insurance and upkeep--up to a certain amount. He could earn extra money for the car's expenses and not drain the savings. Is he learning mechanics so he could repair the car when needed? I suggest that you limit his access to his debit card so that you will be sure that his savings are still intact when it is time for him to go to college. However, you should agree on the rules--this is a time to build trust as well but you should stay on top of the card's use. This child is very fortunate that a good portion of his child support was not needed for his everyday needs as he grew up. You must be a wonderful mother to have such a long range goal of building up his savings funds. I don't think he should think of HIS account as being used for anything he desires as an inexperienced teen. Now is the time for you to teach him life's financial lessons. Let him know his savings account is for college, training for a skill,or buying a house, etc., when he is older. He should strive to get scholarships from his high school grades to lesson college tuition expenses. The economy is shaky right now--the best thing anyone can do is to commit to a good savings plan. Some day when he wants something VERY worthwhile, he won't have to pay outrageous interest to someone because he will then be in a position to pay cash or at least have an enviable savings amount that a lender will respect. Good luck from a wise old great grandmother. Darlene

1 mom found this helpful

T.,
I thought I was the only one with a 16 year old and a 1 year old. My 16 year old isn't driving yet, but she had a job last summer. We discussed how she spent her paychecks and made sure some went into savings. I get $ out for her when needed. She knows she will have to pay 1/2 of her car insurance and all of her gas money. She is also responsible for her spending money. When she goes back to work, she will open a checking account with a debit to access her money.
She will still put a portion into savings. I'll help her go over monthly bank statements.
Our kiddos will be on their own, in college or otherwise, soon. We need to allow them this independence while we can still supervise/offer support.
Hope this helps,
Patty

1 mom found this helpful

First of all, good job with starting him off now learning how to budget his money. My parents did it with my siblings and I and we all have successfully managed our finances into our adult lives. My suggestion is to continue to make him save some first of all. In addition to his account with the debit card, set up a seperate savings account that he can not take from. Maybe now rather than half his earnings, make him put in 25% or a set figure into savings and the rest go in his debit account. With the set savings, you are still teaching him to save for his future you are still giving him the responsibility of the other account. Now as far as the debit account - give him a chance to show responsibility and learn how he has to budget. He has to learn that he has to have enough money in his account to pay his insurance, gas & repairs before he can do the other things. If he doesn't have money for repairs and gas, guess what, he doesn't drive. Insurance is not an option. There are laws with that so that has to be clear. Monitor how he does and if you start to see things going down, you can always take the card then. Give him a chance to learn. I can tell you from experience what happens if you don't start now with the teaching. My stepson's mother completely controlled all his money and now that he is out on his own in the Marines, he is going hog wild. Thank heavens we made him set up a savings account with the money he got from high school graduation and large financial gift amounts from my family or else he would have nothing. He just this past Christmas started listening to us about the cost of living as an adult. He will be 20 years old in a couple months.

1 mom found this helpful

I got my son his own checking account last year. I wish I was as diligent at making him save 1/2 his check. I sometimes wonder if I should make him pay for all his gas. he doesnt go out alot but does do alot of driving due to school. I tell him to enter his receipts daily if not weekly and that alone is an avoidance on his part. I got the account with a debit card so that he would never be without access to money. I assume you are on the account

1 mom found this helpful

My stepson got a bank account at 17 for his new job/car expenses. At the time, my husband sat down with him and they created a budget. Stepson knows that $X comes off the top for his insurance and that he is responsible for the care and feeding of his car. Honestly, we'll probably loan him money (with a payment plan) if he gets into a bind and needs a major repair. If he runs out of gas, though, that is a valuable lesson. We allow him to have the debit card, figuring that he can use it at the gas station and he has to learn to be responsible for it. He got a quick lesson in money management and overdraft fees this week, but he's otherwise been pretty good about it.

You can tell your son that he can have the card, but you will not bail him out on gas/minor repairs/loan him cash for the movies if he doesn't manage his money. Consider laying out a budget and discussing the real costs for car repairs and even maintenance. If he is not responsible about repairs, what is the consequence? No car to drive? I think you should clearly lay out any action you will take (above any natural consequences). And to a point, while we want them to be responsible, sometimes they slip and that's lesson learned.

Think of it this way, if he learns some of these lessons now, it will serve him well in a few years when he's out of high school.

1 mom found this helpful

Hey T. - I have a son that is 16 1/2 too - I wouldn't give him the debit card. I might change the way you have him save money - instead of putting half in the account - have him put 25% in the account for savings and set aside another 25% for gas and repairs. That way he still has his savings. We are struggling with savings too - my son just started a new job and the first couple of checks he wanted to keep because they were small but the second one he put money away and kept most of it - but he pays for any food he wants to eat out, he pays for his outings with the guys from church now, he pays for his own way when he wants to go to Winterfest or Camp. Now that he has money coming in he knows he can handle paying his own way for things but I still make him save - better to learn that savings thing earlier than later in life like I'm trying to do.
Hope that helps.
Take care,
S.

1 mom found this helpful

My approach is to let my 17 y.o. daughter use her debit card and manage her account, while trying to keep an eye on the bank statements, so as to be safe...

1 mom found this helpful

Hi T.,
my name is B. and iam responding to you qustion about your son. I frist was to say that you did a good job on teaching him to save and now you are teaching him responsibilty would let him hold on to the debit card and see how he handle it then if he mess up i would take it back and give him gas money weekly and money for his repairs. He would have a limit and you need to check to see what activity are begin done on his debit card. He needs to also continue to put to put money in his account if he is still working because he still have college to attend. Thanks for being a good parent and teaching your son about life.

1 mom found this helpful

T.,
Based on what I have read, it sounds like your son has been very responsible. If he has maintain your request to save half his money all of this time then it's ok to let go the leash. Now that he is driving, he should be ready to take on a part-time job to help with his expenses and take full responsibility of his spendings. He is real close to being a man and you have done a great job with preparing him for the real world. Having a debit card is the way of the world now days and he has to be well versed to handle a bank account (balancing checking acct etc.) However, I would be sure to get access to his account online so that you can be in touch with his spendings. When he turns 18, he will be well in touch. Good Luck!

1 mom found this helpful

Hi, T., First, let me congratulate you on teaching your child young about the value of savings and money management! In an age where so many hand everything to their kids on a silver platter, you are to be commended. Your son will thank you - trust me! For now, I think you should maintain control; do not hand over the debit card. When he goes to college, that is time enough for him to have to manage things on his own. For now, you are laying the foundation. Keep up the good work!
N. B.

1 mom found this helpful

Hi, I am no expert on teens and money, but I can tell you about my experience with my 17 yr old daughter. I opened a checking account for her after she started her first job so that she could deposit her paychecks and use her debit card to purchase gas for the car. The bank manager discussed with my daughter the importance of maintaining good credit and about being a responsible consumer. Sounds like a pretty good start, right? Well, after about 2 months of managing her own account (which, of course I had to co-sign to open it), she overdrew her account. I had previously stressed to her to leave a $20 buffer in the account to avoid overdrafts--well, she "forgot". I thought it was more safe for her to carry a debit card than cash, but she used it for every little drink, candy, whatever & did not balance the checkbook correctly. It was like a bottomless pit to her (I think). So, I took the checkbook, atm card, & her paycheck & began depositing her checks myself & giving her gas money each week. She has been told that she needs to pay for auto insurance--she did not have any money saved for the December payment, so guess who had to pay it? Yep, me. She also ran up her cell phone bill (internet surfing)for a couple of months & she had to pay that off. I took away her axcess rights and all texting on her phone (plus, I don't want her to have that distraction of texting while behind the wheel--as so many kids do). She also has to pay for her class ring--it has been very hard for her to save the $400 for that ring. Yesterday, we went to traffic court for a ticket she received & she had to pay court costs. It's a tough road trying to teach financial responsibility, but I learned the hard way that my teenager could not handle it all at once, though I had no reason to think at first that she could not. So, I have had to give her the responsibility one chunk at a time. I also try to remember that everything happens for a reason & now I'm glad that we had to go to court yesterday (though I was upset about taking off work to accompany her for that)--I hope she remembers what the judge said & perhaps since it came from another adult other than her parent--but one who has quite a bit of power over her driver's license--anyway, maybe this one hit home with her. Life's lessons :) all we can do is live and learn.

1 mom found this helpful

Hi T.,

I know it is hard decision. Personally I feel it is good if you let him in charge of his own money and teach him how to use this money in a strategic and appropriate way at the same time you keep a whole record by asking him or watching where is spending his money. It worked when I was a teen...:). This way he will experience independences but he will also learn to respect this position.

1 mom found this helpful

I would leave a portion of the money in a money market or savings account. Then have his checking account seperate. I would sit down with him once a week and balance the checkbook and evaluate his spending. i would also create a budget for him. See how it goes! A lot of credit unions and banks offer classes for teenagers ( I know SECU offers this) let him know that this is a privledge! Good Luck!

1 mom found this helpful

I say trust him until he gives you a reson not to. If he is a responsible kid (and it sounds like he is) he will more than likely be responsible with his money.

1 mom found this helpful

Teens and finance are a difficult subject. I have an 18 year old and a 16 (almost 17) both boys... I didn't let my 18 year old have access to his savings until he turned 18. As for the 16 year old. If there is repairs and gas that are needed, I always made my boys work and still have to put at least 1/3 to 1/2 in savings. The rest of their checks can be used for gas, repairs and fun. I think they should have their savings for their future. So far it's working fine

1 mom found this helpful

I would suggest putting part of his money into an account that he can have easy access to, and part in a savings account that won't be touched until college, buying a house, etc.

In addition to teaching children to save, we also need to teach them the dangers of debt, specifically with credit cards. If kids do not know how to save up for things and wait to purchase something until they can pay for it, it will be very tempting to just go buy something on credit and before you know it, they will have hundreds or even thousands of dollars of debt. There is a book I read ("How to Debt-Proof Your Kids" is the title I believe) that talks about helping a child start to manage their own money (6th grade is where they suggested you start) so that by the time they get out on their own, they will not go crazy. It specifically talks about giving the child a monthly 'salary' and it mentions putting 10% into savings, 10% into a 'giving' category for tithing or giving to a charity, and the rest can be spent however the child wants. However, the child needs to have some financial responsibilities to go along with the salary, like paying for a friend's birthday gift, paying for dinner out with friends, lunch money, etc. We've started this with our oldest child when he entered 6th grade, and I think it has helped him understand the power of money, although he is still not very good about writing down his expenses and income, so he can't really create a budget yet. But we hope to get there one day!

Have you heard of Dave Ramsey? He gives financial advice and has great materials for teens and children. His website is daveramsey.com

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