How Do You Think Allowance Should Work With Teenagers?

Kathryn Tuggle, author of How to Money, joins us to discuss the essential money advice teens need for a financially independent future. We talk about first jobs, saving for cars, and how teens can avoid impulse spending.

Full show notes

It’s time for the talk. You know, the big, nerve-wracking one you’ve been putting off for years. The one you know you have to have before kids reach a certain age, but you’re afraid it’ll be awkward and you won’t say the right thing. The talk is essential to your kids well-being and chance for a bright future…..the money talk, of course!

Chatting with kids about money isn’t easy–there’s a lot to cover. It can be uncomfortable, and kids don’t listen half the time anyway. Plus, you might feel like you don’t know enough to give teens the right financial advice to prepare them for adulthood. But if you ask most people the thing they regret most in life, it’s their bad money choices as young adults. If we don’t teach teens how to handle money, they might end up making huge financial mistakes that could have been avoided!

To help us raise money-smart teens, we’re talking with Kathryn Tuggle, co-author of How to Money: Your Ultimate Visual Guide to the Basics of Finance. Kathryn is the editor-in-chief of herrmoney.com, an incredible financial resource for young women! She produces the HerMoney podcast, and co-hosts its popular mailroom segment, where she answers questions about finance. Kathryn’s book is a rich mine of financial advice for young adults, and she’s here today to share some of the highlights.

In our interview, Kathryn and I are discussing the basic financial topics parents should be discussing with kids. Plus, how to teach your kids to manage money and what we can do to help them save for big purchases like cars or even college.

Finance 101 For Teens

No matter how smart and educated your teen is, they may not know the basics of finance, says Kathryn. They don’t teach financial literacy in the classroom, and most teens feel like a financially independent future is so far off that it’s not worth thinking about while they’re still in high school. Don’t assume your teen will figure it out on their own, says Kathryn. Make sure that you’re having conversations about how to earn, save, and invest while kids are still living at home.

One way to do this is to implement discussions about money when you and your kid are at the grocery store or a restaurant. If you’re looking for an after-dinner dessert, have kids help you pick one out, says Kathryn, and help them understand the differences in pricing. When it comes down to choosing between a generic or name brand box of cookies, she suggests you remind kids what they could do with the extra three dollars you’ll save on the store brand–along with all the accumulated money you’ll have from buying that store brand every single week!

When it’s time for teens to get their own job, there are plenty of ways parents can help, says Kathryn. In the episode, she walks me through some of the tips parents can give to teens who have their first job interview. We’re also covering whether or not you should talk to your teen about income taxes this early in life, and if kids should already start investing or putting money in a Roth IRA to save for retirement.

Once teens make money, they’ll have to learn how to save it! Kathryn and I are talking about how teens can develop responsible habits now so they won’t be in trouble later.

Teen Money Management 

Kids love to spend money on clothes, video games, hobbies they’re really into for a month before they lose interest…the list goes on. But as adults, we know how smart it is to save! We can teach our kids to keep their money in the bank, says Kathryn, but to do so, we’ve got to embrace their spendy perspective! She suggests asking teens about the pricier items they’re interested in–a new keyboard, a nice dress, even an iphone–and showing them how to save for it.

It’s not just naivety that brings kids to spend lots of money on glitter eyeshadow or a trendy new hoodie. Social media companies are marketing products to kids on an enormous scale, with algorithms that track their activity to know just what advertisements they’ll click on. Influencers are telling them all day long that they NEED to purchase the latest jeans or supplements in order to fit in, look good and be cool!

If you want to help your teen avoid spending lots of money on things they don’t need, Kathryn suggests sitting them down to discuss this social media advertising frenzy and why they should be questioning it. Remind them that influencers are being paid tens of thousands of dollars to promote products…and these items are probably not as remarkable as influencers might make them seem. She also recommends kids wait 24 hours before hitting purchase on anything, which helps them curb impulse spending and think critically about what they really want to spend their money on.

Saving money is the path to lifelong financial prosperity, says Kathryn. This is especially true for teens who are looking to make their first big purchase. In our interview, we’re talking about the process of saving for a car or even college tuition during the teen years.

Preparing Kids for Big Purchases

For many teens, a car is the first big purchase they’ll make! This is a seriously expensive transaction and won’t come without quite a bit of saving. To motivate them, Kathryn suggests that they use visual reminders of their goal. Some teens benefit from putting a picture of the car they want on their bathroom mirror or bedroom door. Others find it helpful to set a reminder of the car on their phones on the weekend, when they’d typically spend a lot of money! This motivates them to limit their spending so that they can eventually make that big purchase they’ve been saving for.

For other teens, college is the financial goal to focus on. Saving for college starts with knowing exactly what you're saving for, says Kathryn. Some teens want to become teachers, others want to become doctors…and these two things require vastly different financial plans. In our interview, Kathryn and I talk a lot about student loans, and how easy it is for parents and teens to get in over their heads. She drops some helpful tips for keeping student debt under control, even after teens have left college.

At the end of the day, the most important thing is not to skip out on these money conversations, Kathryn says. There’s often a harmful stigma around discussing money, especially in American society–and only we can change that! Kathryn explains that kids almost always pick up money habits, both good and bad form parents. So while we have the chance, she recommends we help kids start off on the right foot and build strong financial futures.

In the Episode…

There’s lots of great financial advice for teens in this week’s interview! On top of the topics discussed above, we also talk about…

• Why teens should consider community college
• How teens can ask for a raise
• What teens should know about health insurance
• Why women invest 40% less than men

Thanks for tuning in! If you want to find more of Kathryn’s work, check her out at hermoney.com or on social media @kathryntuggle. Don’t for...