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How to teach your teenager about financial responsibility

How to teach your teenager about financial responsibility

We all remember our first job. It might not have been the greatest job per se, but it sure taught us some valuable money management skills.

Fast forward a few decades, and our own children are entering the workforce. Now, it’s time for us to pass on those valuable lessons to these soon-to-be adults.

Today’s blog will provide five ways you can teach your teen the importance of money management and financial responsibility.

Highlight the importance of budgeting

Now that your teen has a part-time job, they may feel an eagerness to spend. As their parent, you have a responsibility to help them understand that although it’s tempting, spending large amounts of money on nights out with friends is simply not feasible.

Help them make the most out of their hard-earned money by teaching them the basics of budgeting. At the minimum, your teen should understand what a budget is, why it matters, and what it consists of. Once they’ve realized this, you can work with them in establishing their own budget. This will help your teen understand how much money is coming in, how much is needed to cover expenses, and what money needs to be saved for the future.

Explain the ins and outs of a paystub

If this is your teen’s first-time earning money other than their weekly allowance, chances are they’re going to have some questions about their pay stub.

Pick one of their recent pay stubs and spend some time going through it. Explain the opening summary, including the pay rate and pay period, and discuss the difference between total pay (gross pay) and net pay (final pay).

Open an account

If your teen hasn’t already, they may want to consider opening a checking or savings account to deposit their earnings.

Having a bank account can teach them the power of interest and the value of savings. Plus, many financial institutions offer low or no-cost accounts for young customers.

Teach them investing basics

Parents are often reluctant to discuss, let alone educate, personal investing with their teens. But given its growth over the past few years, teaching them the basics isn’t a bad idea.

Here are some ways you can introduce your teen to the concept of investing:

  • Review common investing terms and concepts. For example, discuss the different types of investments: GICs, stocks, bonds, and mutual funds
  • If you own stocks, explain why you chose to invest in those companies. You can even involve your teen by having them join you in keeping an eye on the stock price and company news
  • Make it real by calculating how much their theoretical contributions could be worth after five, 10 and 20 years. They’ll be amazed at how much their investments could benefit them in the future

Have a conversation about taxes and credit scores

As your child continues to work, budget, and save, you may want to consider discussing other important financial subjects.

For example, as soon as your teen becomes employed, they will become responsible for filing their own income tax return. Thus, spending some time explaining what income tax is, why we must pay it, and how it works, is highly beneficial for your teen.

Another financial topic you’ll want to spend some time covering is credit cards. This financial tool is a double-edged sword–it’s great for making large purchases and generating reward points but if used recklessly it can lead to serious consequences. Teach your teen the benefits of having a credit card and the real consequences that come along with not using it responsibly.


Crawford, Smith and Swallow has been providing the Niagara Region with bankruptcy and proposal services for over 75 years. Our Licensed Insolvency Trustees are dedicated to helping individuals like you regain control of your finances. Contact us today to learn more about how we can help.

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