Money Mistakes Teens Make and How Parents Can Help Prevent Them

Here are a few ways parents can raise money-wise teens.

Teenage couple buying tickets at cinema box office
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Teens who are new to the work force suddenly find themselves with money, and many may not be equipped to deal with their newfound wealth, however modest it may be. Parents can help steer their teens in the right direction by recognizing some of the most common money mistakes among new earners. 

Teens underestimate how much things actually cost.

Say a teen has saved $4000 for a used car. Anyone who's owned a car knows there's much more than just the physical object involved.

But an inexperienced teen is likely to look at the price tag, rather than the full cost, which includes insurance, taxes, and registration, not to mention upkeep and gas.

When he or she is talking about a future purchase like a car, prepare your teen for the hidden costs they're not thinking about. Help them research the costs and make a written plan before they commit any money. This will help your teen create a goal for the true value of the item they wish to purchase.

Teens don’t make a plan to save their money.

Teens tend to spend what they have in their pocket thinking they will get more when they need more. And sometimes they even plan to spend what they will be getting at a later time. Parents can help their teen save money by setting expectations of how much money their teen will save using a written plan with money goals. While they may need their money for college or other things in their near future, by helping them plan, teaching them early how to set a budget and plan for unexpected expenses is a valuable lesson.

Teens give into impulse buying.

Ah, who among us has not been there: The splurge on something you don't really need, but really want. Since hanging out at the mall and shopping is a social activity for many teens, their already shaky impulse control will be tested, not to mention there may be some peer pressure to contend with as well.

Parents can help their teens learn impulse control by acknowledging the normal behavior of impulse buying, and maybe even sharing a personal experience with impulse shopping. Remind your teen what they are saving their money for and role-play impulse buy situations, so your teen is prepared for future situations with peers.

Teens carry too much cash.

Ideally, your teenager will have his paycheck direct-deposited to his bank account, so that they don't have to take the extra step of cashing and depositing their funds. A debit card has its own set of concerns, but it's safer than carrying cash. Parents should encourage teens to carry only small amounts of cash, if any, and to be discreet about showing anyone how much money they have.

Teens will lend money to their peers.

Parents should explain to their teens the problems that can happen when you lend money to a friend, and encourage their teens to not disclose how much money they have to peers. Insist that your teen talk it over with you before they make a loan to a friend.

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