How to Raise Your Teenager's Money IQ
You help your kids with schoolwork. Maybe you drive them to soccer or dance. There was even a time when you tried to teach them to clean up after themselves. But what about money? What do you want them to learn about making, saving, and spending money? What kind of relationship do you want them to have with money?
Many of us grew up in households where we didn’t talk about money. But, with your kids, it’s take two. 🎬
I asked parents who work here at YNAB how they set their teenagers up for financial empowerment, with one important requirement: it has to be easy! No heroic feats of parenting here.
So, read on to find out how to introduce your teen to YNAB so they can develop good, strong money habits.
Invite your teen to YNAB Together
First up, as part of your subscription to YNAB, you can invite up to five family members and loved ones to create their own YNAB account and login. (To use YNAB, they have to be 13 or older in the U.S., and 16 or older outside the U.S.).
Just invite your teen through YNAB Together and they’ll be able to create as many budgets as they like, without seeing any household or personal budgets connected to your account. (You can share and collaborate on budgets with your teen(s) if you wish.)
Once they have their own account, they can open a budget and make a plan for their money. Kat, who hosted a brilliant Instagram Live on the subject, recommends wiping out all the default categories (like rent/mortgage and utilities) in a new budget and starting from scratch.
Blair, on our Support team, said, “They are going to have weird categories and categorize things differently than I would, but that’s fine. Everything is fine.”
Veronica from our Marketing team added, “One of my teens has a category called ‘STUFF’ and another called ‘OOPS.’ I do not know what those are for, but I also don't care. Let them run the show.”
The freedom you give your teenagers to include their priorities and random emojis will give them a sense of ownership. It will also help them feel like you’re not staring over their shoulder.
“Letting them decide on categories is key. For many years, my 16-year-old had only ‘Stuff I Want to Buy’ and ‘Savings.’ He’s now progressed to multiple categories with Targets and scheduled transactions,” said Kathryn.
Start ‘em young
The beauty of starting in YNAB as a teenager, according to Kat, is that they can make mistakes when the stakes are low. If they blow their money on video games one month and realize they can’t afford movie tickets the next month, no big deal. It might be painful, but that’s what they need to learn. Surely, that’s a preferable learning experience to running out of money as a young adult and having your utilities turned off. Or having your credit score negatively impacted by unplanned credit card debt.
I can say from first-hand experience that it’s very tempting to steer your kids to make “smarter” money decisions. My six-year-old, for instance, would immediately spend her allowance on flimsy toys at the drugstore that I knew would break. But I didn’t want to forbid it because that’s what allowance is all about. Eventually, she started to make the connection that she needed to save more money (and wait) to afford a better toy.
Allowance tied to chores or not?
YNAB’s founder, Jesse, wrote in YNAB: The Book why each of his kids receives a cash allowance early on: “Let them learn by doing.”
This was also the general consensus among YNAB parents I spoke with. Kat, for example, said her kids receive some allowance automatically because she wants them to learn how to manage money. Melanie, on our Quality Assurance team, has her eldest son contribute to his monthly phone bill, even though the money comes out of the pocket money that he gets each week.
“Having weekly income and organizing it to cover monthly and irregular expenses is great practice.” Even though she is, in essence, adding a step, she believes the learning opportunity is worth the small amount of effort.
Kat tells her kids that they do chores because they’re part of the family, not for money (this way she also doesn’t have to wade into the murky water of reducing allowance if they do a crummy job of cleaning up their room). Kat says you can even pay them extra for tasks they would normally not do like detailing your car, organizing your digital photos, or writing your blog posts.
What if they’re not interested?
What’s that you say? Teenagers aren’t naturally interested in planning for the future?
Here’s the first selling point that Kat uses: “Using a budget helps them strategize how to buy something they really want. It also gives them permission to enjoy whatever they saved up for.” She had a friend whose family was considering getting a dog. It was EXTREMELY motivating for the teenager to create categories like adoption fees, vet visits, grooming, etc. because it was a way that they could help the parents work through all of the possible roadblocks.
Just start having conversations around money
In my house, with the exception of mega yachts, my wife and I generally try to avoid the phrase, “We can’t afford this.” Instead, when the kids ask for expensive clothes or a pool, we talk about how we are prioritizing our money for other things, like the upcoming vacation with their cousins. Or, we help them make a plan to save their own money or earn money so they can make it happen.
We want our kids to see that you’re not a better person if you save money or irresponsible if you spend it on short-term fun stuff. Money is all about tradeoffs. Whatever you spend on x is money you can’t spend on y. This seemingly simple lesson is something that’s very hard to learn. Humans, and especially kids, are wired to desire many things, often at the same time. The YNAB app helps teens learn about trade-offs because they can visually see where each of their dollars is currently assigned.
Or, as Kat sagely says, “You can buy anything you want, but not everything you want.”
Show them that you, too, check to make sure that purchases are funded. “When they ask for something, a casual ‘Let’s look at your spending plan,’ helps start that habit,” says Kathryn.
Remember, your teenager won’t be perfect with money (who is?). But if they can have the space and support to practice, they’ll be well on their way.
YNAB IRL: Empowering the Next Generation Through Healthy Money Habits
Ann, a YNABer from Pennsylvania, has sons too young to get the car keys but old enough for their own YNAB account. Ann and her husband invited their 15-year-old to create his own login and account through YNAB Together to teach him money skills.
Here’s her recent update:
“My 15-year-old son had his first real job and was learning to use YNAB. Then he got laid off (no fault of his own) and wasn’t earning money for months. Over time, he had several overspent categories in YNAB. He got frustrated and kinda gave up. He didn’t want my help to try to reconcile it either. I was sad.
When he finally got his next job, he was really excited to get his first paycheck. I thought this was because he wanted to go spend the money. But then he told me the real reason: “Mom, with this paycheck, I can get back on track. It’s enough money to pay myself back and reconcile everything again. Can we work on it right now?”” 🥲
📚 Ann and her husband’s primary savings goal right now is college…
🚗 And a new car.
🍋 #1 guilt-free expense? Hint flavored water.