Personal finance for kids and teenagers
The first lessons for kids about money come from their parents. You can start your kids off right by setting a good example in how you manage yours. Next, take advantage of every opportunity to instill great money-smart habits. Here's how to teach your children about money:
- Under the age of 10: Make allowances dependent on your child completing age-appropriate chores. This is the first lesson in work for pay. A five-year-old can be in charge of putting toys away. A 10-year-old can handle kitchen or garbage chores. Create a formal schedule for the allowance, such as every Saturday. It's your child's introduction to pay day.
- Age 10-15: Shift some of a child's spending from your wallet to theirs. For example, rather than hand over $10 or $20 when your son is heading out to the movies, raise his allowance a bit and put him in charge of managing his entertainment money. Or if your kids are gaming enthusiasts, introduce cost sharing: set your spending limit on games, and make it clear they have to cover costs beyond that.
- Age 15-18: Stretch the allowance payout period to two weeks, and then by the time they are 17, make one monthly payment. Teach your teenagers about budgeting, and help them work out a plan for making their money last the entire month - good training for when they leave home for college.
- Age 12 and younger: Set an expectation that 50% of any money gifts your child receives will be put in a savings account. Make it clear that the money is 100% theirs, but encourage them to tuck it away for a savings goal. And that requires you sitting down and agreeing on a worthy savings goal, such as helping with future college costs.
- Age 13 and older: Consider matching savings contributions for teens. For every dollar of allowance or job earnings they save, you will contribute 50 cents or a dollar. It's a great motivational tactic.
Money Management Tip #13
If your child wants more money to spend beyond their basic allowance, let them earn it. Babysitting, dog walking, and helping elderly neighbors with household chores are a few examples of appropriate jobs for young teens.
Budgeting and credit
- Age 12-15: As your children enter their teens, consider giving them half of their allowance in cash and the other half as a spending limit on a debit card. This way they will learn how to budget their money even when they aren't paying cash. If they don't spend the debit card allowance, together you can use Online Banking to transfer their unused allowance into their own savings account.
- Age 15-18: Teach your older teenagers to monitor their bank accounts so they know how to limit banking fees. Show them how following a budget can help them spend within their means and avoid overdraft fees.
- Age 18 and older: Under the Credit CARD Act of 2009, youth under the age of 21 who apply for a credit card must either provide proof of income to repay credit card debt or have an adult co-sign. Before co-signing for your teenagers, teach them to handle credit cards responsibly.
A good credit profile will help them qualify for advantageous loan and credit terms when they become adults. If your teenagers have credit cards, monitor their use by sitting together each month to review the statement and send in the payment.
What's next? Students and banking
Some accounts and services, and the fees that apply to them, vary from state to state. Please review the information for your state in the Personal Schedule of Fees (at www.bankofamerica.com/feesataglance or at your local Banking Center) and in the Online Banking Service Agreement at www.bankofamerica.com/serviceagreement.