Depending on where you live, personal finance may or may not be a part of your high school learning curriculum. But even if you were one of the lucky ones to learn the basics in school, research shows that most teenagers in the U.S. and around the world understand very little about the financial responsibilities that await them as college students and young adults.

To help you (or your teenager, if you’re a parent) navigate the financial universe of early adulthood, we’ve compiled a comprehensive guide to personal finance for teens that covers everything from first jobs to financing a gap year to saving money as a college student.

1. Tips For Getting Your First Job

2. Deciding Between An Unpaid Internship And A Summer Job

3. What Teens Should Do With Their Money

4. Parents: Tips To Help Teens Budget

5. Parents: Teach Your Teen To Save And Invest

1. Tips For Getting Your First Job

The first step in learning good financial habits is getting a job. Working as a teenager is not just about earning money — it’s a character-building lesson in responsibility and independence. And while not every company may be willing to hire teens, whose resumes are usually light on experience, many summertime operations all but rely on them to fill seasonal posts. Think town recreation centers that need lifeguards and snack bar attendants, summer camps that need counselors, and landscaping businesses that need mowers and planters.

Keep in mind that the road to employment for teenagers isn’t always easy, and you have to be persistent to navigate the ins-and-outs of applications, interviews, and rejection. But persevering will be well worth it when your paychecks start arriving.

Tip: Hold a mock interview with a parent, relative or family friend who has experience hiring employees. Ask them to teach you how to properly answer questions that an interviewer might pose, and try asking questions at the end of the interview. When your first job interview rolls around, you’ll feel more confident and prepared.

Suggestions for questions your teen could ask at the end of a job interview.

2. Deciding Between An Unpaid Internship And A Summer Job

A surprising trend has emerged in the U. S. labor force in recent years: Fewer teenagers are working at part-time or summer jobs, according to The New York Times. What gives? One possible explanation is that today’s teenagers are more focused on their education—spending more time in school and on school-related activities than previous generations, and opting for unpaid experiences that may pay off in other ways, such as internships that offer academic credit or job-shadowing that offers insight into the day-to-day lives of professionals.

Though not for everyone, these unpaid arrangements can be an attractive way to gain valuable experience that may not be attainable with a typical summer job.

If you’re skeptical of unpaid work, consider these two points in making your decision:

  • Part-time jobs can reduce your financial aid award: Families sending kids to college fill out the Free Application for Federal Student Aid (FAFSA) to see how much money they are expected to pay toward their children’s college costs — this is known as the Expected Family Contribution (EFC). One of the factors that goes into the EFC is the student’s own income. The EFC formula includes a $6,840 “income protection allowance” for students. That means students can earn $6,840 per year without affecting their eligibility for financial aid. For earnings above the threshold, however, half of every dollar gets added to the family EFC.
  • Part-time jobs don’t cover today’s college costs: According to MarketWatch, the average price of an undergraduate degree has increased by 161 percent since 1987, and hourly wages have not kept up. For example, in 1987, the four-year price of in-state tuition, fees and housing at the University of Central Florida (UCF) was $33,100. Back then, a student earning minimum wage and working 20 hours per week could earn enough money to cover 106.5 percent of the costs of their UCF education. But in 2016, that same part-time minimum wage job would have only covered 68.2 percent.

Of course, which path you choose is a personal decision based on your values and priorities, financial situation, parental advice, and college and career goals. And if you really need the money, the choice will be easy.

3. What Teens Should Do With Their Money.

If you have a paid job, you may have a few questions about what to do with all that money coming in, like where (and how) to deposit it so you can save or spend it.

There are two primary options to consider when opening your first checking account before turning 18.

  • Joint Accounts
    • Your bank may offer a student account that your parents or guardians can open in your name as a join account. With a joint account, both you and your parent have access to the funds, as well as the details on how that money is spent. (Parents: Depending on the options your bank offers, you may even be able to set up text or email alerts to monitor the balance and spending on your teen’s account. Sorry, teens!)
  • Custodial Accounts
    • Slightly different from joint accounts, you technically own the money in custodial accounts, but you won’t have direct access to the money. These types of accounts can be useful when parents want to take a more hands-on approach to monitoring their teen’s finances, but it may not be as beneficial as a joint account could be for learning independent financial management.
Definition of a joint account vs. a custodial account

Tip: Parents, sit down with your teen and discuss how their new account will work, whether it is a custodial or joint account.

4. Parents: Tips to Help Teens Budget

Once teens start earning a regular income, they may want to start spending it too. Helping them develop a budget is a critical aspect of personal finance for teens as it can help them establish sound spending habits. To assist them, there are a couple of solutions.

  • Download budgeting apps (there are tons)
    • Your teen may spend more time looking at their smartphone than actually communicating with you. You can use this to your advantage. Regularly using a simple expense app may help them stay on top of how much money they have. More sophisticated apps can help them monitor recurring bills and revolving accounts like credit cards in the future.
  • Have them make financial contributions to household expenses
    • Whether it’s their first credit card or a car payment, the money they eventually earn shouldn’t just be for spending on the things they want — it will likely also be for spending on the things they need. Help kick-start this idea by creating a bill-type scenario where teens contribute to their expenses at home. It may be their portion of the cellphone plan or even the gas it takes to drive them to and from work, but either way, it can help prepare them for the future.
  • Communicate about their spending
    • Regular budget meetings can be a good way to keep a teen’s spending front and center in his or her mind. Regularly reviewing their finances together is a great habit for the future. If they get used to doing it when they’re young, they’ll most likely continue to do it into adulthood, even when you’re not looking.

5. Parents: Teach Your Teen to Save

Of course, you can’t have a conversation about personal finance for teens without talking to your teen about saving. The idea may not initially seem cool, but solid saving habits can make a world of difference in the future. Beyond opening a savings account, there are plenty of ways you can help your teen earn more and save more along the way.

The benefits of starting to save at a young age.
  • Funnel a set portion of their earnings into savings
    • Teach your teen to deposit a percentage of their money each week into a savings account when their allowance or paycheck first hits their checking account. This can help generate good saving habits for the years to come.
  • Match the money they put aside
    • Matching the money your teen puts in savings can be a good way to encourage them to continue the practice. It may also be an opportunity to prime them for future jobs that offer 401(k) savings matches.
  • Encourage them to think like entrepreneurs
    • While your teen may have landed their first job at a local restaurant or grocery store, encourage them to also think creatively about the ways they could earn (and save) additional money. If they’re crafty, they could set up a website selling their art or wares. If they play an instrument or excel at a certain subject, they could offer to tutor other students for a small fee. If they like YouTube, they could start a channel and make money from ads. The options are endless.
  • Teach them to invest
    • Stocks, bonds, certificates of deposits (CDs) and real estate may be foreign words to teenagers today, but they can grow into serious opportunities for securing their financial future. Teaching a teenager to invest in the stock market could be as easy as encouraging them to buy a single share of a company they’re interested in or passionate about. Watching the value of that stock fluctuate over time might be a truly hands-on way to learn a little bit about investing. Also, some financial analysts recommend encouraging teens to open a Roth Individual Retirement Account (Roth IRA) to get them thinking about saving for the long term.

Tip: Open a savings account with a competitive interest rate and schedule regular check-ins with your teen on his or her payday to evaluate how much money is going into his or her savings account, and how much that interest is earning them on a daily or monthly basis.

Definitions of a CD and a Roth IRA.

Start Your Financial Journey Sooner Rather Than Later

Working, budgeting, investing and spending wisely during your teenage and college years can help you lay the foundation for responsible financial management down the road. There are tons of resources online to help you make smart decisions along the way, from saving on college tuition to using your credit card responsibly. You’ll thank yourself later when life’s bigger expenses come knocking.

Published August 23, 2017.

Updated August 24, 2020.

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