Many of us wish we’d learned more about money in our teens, so that we could have been better equipped for moving out and taking charge of our own finances.
Some schools are even taking notice of this, and are starting to offer more in the way of financial education to students.
But if you have children of your own – especially ones planning on leaving home or going to university soon – it could be a huge help to explain a few basic money concepts to them while they’re young. They might thank you for them later!
How to budget
It’s all too easy when you’re young to look forward to being more financially independent, but when that time finally arrives, it can be daunting figuring out how much to spend in a normal week or month.
If your teenager is going to be moving out for the first time soon, it could be wise to sit down with them and help them figure out a rough monthly budget. Whether they will be getting financial help from you, taking out a student loan or supporting themselves, it will be hugely beneficial for them to have an idea of how much they should be spending on food and other essentials. This in turn will give them an idea of how much of their budget can go towards having fun and help them feel less stressed about their spending and running out of money.
How an overdraft works
Student bank accounts tend to come with an interest-free overdraft, but your teenager still might not understand precisely what this means.
Fortunately, it’s not a difficult concept to grasp, so taking five minutes to make sure they know the ins and outs could save them from potentially exceeding their overdraft limit and racking up interest and charges without realising. It’s also important to remind them that even though a student overdraft might be interest free, it is still debt and will need to be repaid eventually. If you think they might need a quick refresher on the topic, you can show them our article How overdrafts work.
Paying rent and bills
If your child is going to be moving out soon and will be in charge of paying their own rent and bills, make sure they get into the habit of paying what they owe in time.
Teaching them how to set up standing orders and Direct Debits with their bank could be helpful for making these payments, whether they will be paying themselves or sending the money to a housemate who then pays for everyone.
Our article What’s the difference between a Direct Debit and a standing order? has more information on how useful these services can be.
Splitwise is a great app friends and roommates can use to keep track of bills and other shared expenses. It is a free and easy-to-use tool that lets people record how much they owe each other so they can settle up.
What a credit score is
It’s perhaps not the most exciting of topics, but taking a few minutes to make sure your teenager understands what a credit score is could easily benefit them in the long run, particularly if they’re about to turn 18 and want to get their own credit card.
Most minors have no credit history, and if they do, most credit report providers won’t disclose a credit report for them anyway. However, you automatically get a credit score in the UK when you reach the age of 18. Even if your teenager is unlikely to be applying for credit in the near future, they should still understand what affects their credit score and the importance of keeping it in good shape, as even decisions they make now can have an affect on their financial future. You can read more in our articles Do I need a good credit score to borrow money? and Seven steps to improve your credit score.
Financing a holiday
Lots of people take their first holiday without parents or guardians as early as their teens, and it goes without saying that money is a huge factor in these trips.
If your teenager is going abroad with friends soon, make sure they know how to handle their finances. Have they set a budget and thought about how they will get cash in the local currency in advance of their trip? Do they know the exchange rate? Do they need travel insurance?
The return of roaming charges in the EU is another thing to keep in mind, as it means your teenager could accidentally rack up bigger mobile bills overseas for using data or making calls. Our article How to save on mobile costs when you go on holiday explains what roaming charges are and how best to avoid them.
How insurance works
If your teenager is thinking about buying their first car then understanding insurance is key, as it is a legal requirement to have car insurance before hitting the road.
Teach them to compare quotes for the best deals and keep their car safe, and encourage them to consider getting a black box policy designed for new drivers, as this could help refine their driving and lower their premiums over time.
If you might have a reason to borrow their car, you could offer to put your name on your child’s insurance policy with them, as having an experienced driver on the policy will lower the premiums they have to pay.
Shopping around for deals
It might seem obvious, but to a lot of people – particularly those only just starting to take control of their finances – shopping around for the best deal on a particular product isn’t always intuitive.
Many people don’t realise how much you can save by casting your net a bit wider, and this can be especially true for younger people who may be used to always getting a product or service from the same place.
Encourage them to get into the habit of shopping around, particularly if they are leaving for university. For example, many university campuses will have an on-site grocery shop, but these are often much more expensive than other nearby shops that offer the same products.
Compare cheap car insurance quotes
Car insurance renewal premiums have a habit of increasing every year, even if you haven’t made a claim. Compare car insurance quotes from over 110 UK providers – you could save up to £490* per year.
*51% of consumers could save £490.26 on their Car Insurance. The saving was calculated by comparing the cheapest price found with the average of the next four cheapest prices quoted by insurance providers on Seopa Ltd’s insurance comparison website. This is based on representative cost savings from June 2023 data. The savings you could achieve are dependent on your individual circumstances and how you selected your current insurance supplier.
The importance of saving
It’s never too early to learn about the importance of saving, and your teenager might have already got a headstart on this if you’ve given them pocket money over the years.
Encouraging teenagers to save money whenever they can will help them get into good financial habits in the future, such as building an emergency fund which they can dip into in the event of any unexpected expenses. Read more in our article How to build an emergency fund.
It would also be savvy for them to start building up a pension fund as soon as they start their first job, even if they do not have access to a workplace pension scheme. The earlier they start setting aside money for their pension, the easier it will be for them to afford a comfortable retirement in the future. For more guidance for first-time pension savers, take a look at our article Saving into a pension for the first time.