Life After Grad: Tips on Teaching Financial Literacy to Teenagers

It’s a big moment when your teen finally accepts that high school diploma and starts forward on their own path as an adult.

Their next steps could branch off in multiple ways—they might choose to pursue higher education in university, they could hone their skills and specialize in a trade, or they may even decide to take a gap year to think about their future.

teenager in dorm room

But, regardless of their personal decision for the coming months and years, you’ll likely be looking for ways to help set your teenage child up for success.

You don’t want to micromanage their decisions, of course. This is a time for your child to learn how to manage their own life.

Still, that doesn’t mean that you can’t give them a nudge in the right direction now and again! And there’s no more important guidance you can give than going through the basics of financial literacy for teenagers.

To help ensure your teen has the knowledge they need, start with these six essential money management tips:

1. Teach Them to Budget

There’s no more important step to ensuring financial security than having a detailed and well-thought-out budget in place.

And that’s especially true for a young adults, since they likely won’t be swimming in cash when they first head out on their own!

The basics of budgeting is simple: simply keeping a track of income and expenses. Initially, your teen should do this religiously, tracking a new transaction every time it happens.

Then, at the end of each month, it’s time to add up the money going in and the money going out. At that point, your teen can make adjustments to spending if needed.

Make sure that your teen’s income includes not just paychecks or student loan payments, but also money from allowances, investments, and any passive income.

Ideally, the money your teen spends should be no more than 50% of their total income, but this number can vary depending on their individual circumstances and any help you’re providing.

To make sure you cover all the bases, visit this page to get tips on creating a budget and learn more about basic financial literacy for kids and teenagers.

2. Encourage Them to Save and Invest

After your child has a handle on balancing their earning and spending, the next most important part of financial literacy for teenagers is saving.

If your child is still living at home, then they’re in a great position to save a sizeable chunk of money each month. Suggest they aim to save between 30-50% of their monthly earnings.

Making it a habit to set money aside for savings each month is one of the best financial literacy skills a person can have.

And, even if your teen is only able to save a small amount each month, seeing their savings account steadily increasing will help set them up for future success.

After that, as those savings start to grow, it’s time to look into potential investment options.

 There’s plenty of options when it comes to investing, from stocks and mutual funds to GICs and high-interest savings accounts. The first step is determining how much risk your teen is comfortable with.

Teach them about good investing techniques, like dollar-cost averaging and diversification, so that they can balance the money they invest and the risk involved.

While the option of just leaving money in a standard savings account is certainly safe, adding some thought-out investments can help build wealth and minimize the impact of inflation.

3. Talk About the Importance of an Emergency Fund

It’s no secret that living paycheck to paycheck is a stressful situation at any age.

A single emergency could mean having to take on unwanted debt, falling short on cost-of-living expenses, or even losing housing.

That’s why it’s so important to teach your teen early on about the importance of having an emergency fund.

Kept separate from a savings account or investment fund, an emergency account is meant to be used only when absolutely necessary.

Financial experts suggest having enough money set aside to fully cover three to six months-worth of expenses.

It goes without saying that your teen likely won’t be able to save that much right away. But, as with a savings account, every little bit set aside helps.

The important thing is to make sure your teen understands the overall purpose of the emergency fund, so they’re not using it frivolously.

Having that financial safety net to depend on can make a world of difference in times of trouble.

4. Practice Priority Setting

Let’s be real for a minute; every parent was once a teenager, and likely knows how easy it can be for teenagers to be drawn into financially irresponsible behavior.

From buying trendy new products to going to clubs and brunches with friends, there are a lot of ways for teens and younger adults to burn through their money faster than they planned.

To help ensure your own child doesn’t get drawn into the trap of overspending, it’s crucial to teach them how to prioritize.

Start by pulling out that budget your teen created, and letting them run through their spending and sorting their purchases into ones that are truly necessary, and ones that are less important.

Utility bills and car insurance? Important. That new dress from their favorite clothing store? Probably unimportant.

Being able to properly differentiate between wants and needs can make all the difference when it comes to making smart financial decisions.

Of course, if your teen has extra money to spend, there’s no reason not to enjoy some luxuries now and again! Just make sure they know that they should always be paying for essentials first.

5. Discuss Credit Cards and Loans

Credit can be an incredibly helpful financial tool, or a road to complete financial disaster. That’s why discussing proper use of credit cards and loans is a crucial aspect of financial literacy for teenagers.

Start by showing your teen how to apply for their own credit card. For many teens, a secured credit card is a great first choice.

These cards require a cash deposit, with the credit limit generally being the same as the deposit amount. They let teens build their credit history with minimal risk.

Once they have their own card, teach them how to use it to help build and maintain a good credit score.

Ensure that your teen knows they should never put more on their credit card than they can afford to pay off in full at the end of the month.

This way, they can build their credit score (enabling access to better rates), and also avoid losing money paying hefty interest charges.

The same basic philosophy should be applied to any loans that they might need to take out for schooling or major purchases.

6. Suggest Side Hustles

Whether your child is a full-time student or already working a job, suggest they look into ways to create additional sources of income.

In today’s digital world, there are many opportunities for your teen to earn money online. Think freelance jobs like content writing, graphic design, or data entry.

Online work can be an especially good choice for students, since the work schedule is often more flexible and still lets teens focus on their studies.

Alternatively, suggest your child look for an entry-level part-time job to help them develop new skills while also increasing their monthly income.

In either case, an extra source of income can be invaluable both in the short term, as a way to sustain daily living, and in the long term in terms of acquiring work knowledge.


In the end, your child will likely make some mistakes as they learn to navigate their finances and manage their own money.

But, by covering the basic rules of financial literacy for teenagers, you’ll be helping to ensure that your teen has the knowledge they need to navigate any issues they might face.

And the effort will be well worth it as your teen learns to handle their money and grows to become a successful adult.

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