A Guide to Personal Finance for Teens

Deciding between an unpaid internship and a summer job

Though not for everyone, unpaid internships can be a way to gain valuable experience that may not be attainable with a typical summer job. Unpaid internships may pay off in other ways, such as offering academic credit or job shadowing that gives insight into the day-to-day life of your career choice.

If you’re skeptical of unpaid work, consider that part-time jobs can reduce your financial aid award. Families sending kids to college should fill out the Free Application for Federal Student Aid (FAFSA) to see how much money they’re expected to pay toward college costs. This is known as the Student Aid Index (previously called the Expected Family Contribution).

One of the factors that goes into the Student Aid Index (SAI) is the student’s own income. The SAI for 2024-2025 includes a $9,410 “income protection allowance” for students. That means students can earn $9,410 per year without affecting their eligibility for financial aid.

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 choose from when considering a checking account before turning 18. (Please note: Some financial institutions may not let students open a checking account if they’re under 18 years old. You must be at least 18 to open a Discover checking account.)

Joint accounts

Your bank may offer a student account that parents or guardians can open in a teen’s name as a joint account. With a joint account, both the student and parent can access funds, as well as the transaction history. Depending on the options your bank offers, parents may be able to set up text or email alerts to monitor the balance and spending on the account.

Custodial accounts

Teens own the money in custodial accounts, but they 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. It may not be as beneficial as a joint account for learning independent financial management but offers the same benefits for things like direct deposit and earning interest.

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

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: If your teen spends a lot of time looking at their smartphone, you can use this to your advantage. A simple expense app may help teens stay on top of how much money they have. More sophisticated apps can help them with money management, like handling recurring bills (like their phone bill) 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  smartphone 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 top of mind. Regularly reviewing finances together is a great habit for the future.

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. Investing their money is another way you can help your teen earn more interest and save more along the way.

• 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 shop on platforms like Etsy. 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.
• Teach them to invest: Things like certificates of deposit and real estate may be foreign concepts to some teenagers today, but these types of investments can grow into serious opportunities for securing their financial future. Teaching a teenager about investing and showing them how investments can fluctuate over time may help them learn about the rewards and risks of this financial strategy. 

Tip: Learn about savings accounts with competitive interest rates, and schedule regular check-ins with your teen to evaluate how much money is going into their savings account, and how much interest they're earning.

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.