Teen years and young adulthood
Teens and young adults start to earn money and make financial decisions on their own, learn how to find and apply useful information, and make choices about their future. Adult supervision, guidance, and feedback are important in helping teens learn to navigate these experiences successfully.
Featured activities for the teen years and young adulthood
Family members’ jobs
Research and compare the jobs held by family members and what education and training it took to get there.
What’s on a pay stub
Show your child how deductions make the difference between wages and take-home pay.
Whether college is years away or just around the corner, your teenager can explore and compare schools online.
Money as you grow: Conversations and activities
“Your paychecks might be smaller than you expect, because taxes are taken out first.”
- Discuss the difference between gross pay (before taxes are taken out) and net pay (the amount you take home).
- Explain that the W-4 form, which you fill out when starting a job, determines the amount of taxes taken out of a paycheck.
- Explain that tax brackets vary depending on how much you earn.
- Discuss what taxes pay for, including schools, road maintenance, and medical help for the elderly.
- Walk through your teen’s paycheck together, item by item, to figure out what is being deducted and where the money goes.
“A good rule of thumb is to save 10% of what you earn, and have at least three months’ worth of living expenses saved up in case of an emergency.”
- Once your teen has a steady job, help him set up a savings program so that at least 10% of earnings goes directly into his savings account.
- Help your teen track what he actually spends in a month. Talk about how to estimate three months’ worth of expenses, and how much to save from each paycheck to build up his savings.
- Talk about how to keep money in a safe place, like a federally insured bank or credit union.
- Explain that, if possible, it’s better to have more savings – like six to nine months’ worth of living expenses, instead of only three.
“The sooner you start saving, the faster your money can grow from compound interest.”
- Compound interest is when your child earns interest on both the money she saves and the interest she earns. Show your child the following: If she sets aside $100 every year starting at age 14, she’d have about $23,000 at age 65. However, if she begins saving at age 35, she’d have about $7,000 at age 65. The example assumes the account earns 5% every year.
- Experiment with your child to show the effect of saving different amounts at different interest rates. Try out the SEC’s .
- Discuss how much your child can save. What will she gain? What will she have to give up? Is it worth it?
- Explain to your child that once she starts a job, she may be offered an account at work called a 401(k). Some employers provide matching contributions as an incentive to save, so it’s smart to save at least enough for the maximum matching contribution.
“You can save up for short-term goals, and you may want to invest money to achieve long-term goals.”
- Your child should think of a short-term goal as something he wants within the next year or two. Savings accounts are safe and help your child feel sure the money will be there when he needs it.
- Long-term usually refers to something that is more than five years away, like buying a first home or eventually retiring. Investments can give your child’s money more power to grow and compound over the long term, but there’s risk of losing money. The SEC offers .
- Ask your child to think about goals. Attending college? Purchasing a car in the next couple years? Moving to a new city? Buying a home sometime later in life? Define two financial goals for the long-term future, and help your child plan a few steps to help achieve them.
- Explain that IRAs and 401(k)s are ways to save up money for the far future, and the earlier your child can start saving, the more powerful these accounts can be.
“When you invest for the long term, it’s worthwhile to comparison shop.”
- Recognize that your child might not use investing knowledge for years, but talking about how to compare investments can help build comfort and confidence.
- Talk about the benefits, risks, and costs of investing. For example, for a stock mutual fund, the benefit is the potential for long-term growth, the risk is the potential for losing money, and the costs include fees paid to the mutual fund company regardless of gain or loss.
- Share with your child the idea of not putting all your eggs in one basket and the advantages of a mix of stocks, bonds, and cash.
- Share your own stories about long-term investing and what you’ve learned.
“College graduates tend to earn more than people who did not go to college.”
- Discuss how much you can contribute to your child’s college tuition and expenses each year.
- Compare college costs, graduation rates, loan default rates, average monthly loan payments, and employment prospects by using the Education Department’s .
- See what schools cost by finding the “net price calculator” on their websites; know that most families don’t pay the tuition sticker price.
- Use the CFPB’s Paying for College tool to compare financial aid offers.
- To estimate your child’s financial aid, use the tool.
- Visit to research additional loans, scholarships, and grants, and use the calculators to estimate your child’s monthly loan payments.
“You should use a credit card only if you can pay off the money owed in full each month.”
- When a parent cosigns for a child’s credit card, any late payments the child makes also affect the parent’s credit history.
- Explain that paying bills late can hurt your child’s credit history and affect her chances of getting a job and an apartment.
- After reaching age 18, your teen can get .
- Shop for a credit card with your teen, comparing interest rates and annual fees. If your child’s college or university offers a credit card, take care to review the terms offered.
- Explain that there may be an emergency expense that your child can’t pay immediately and needs to charge, and that’s why it’s important not to charge everyday items.
- Explore credit card repayment calculators with your child, to see how long it could take to repay a $1,000 credit card debt by making the minimum monthly payments.
“Your health and your property need protection, and most people buy insurance to avoid high costs when something goes wrong.”
- Remind your teen to comparison shop for insurance like he would for any other product.
- Your teen may be able to , if you have it – with some exceptions, he is entitled to, by law, until he turns 26.
- Discuss disability insurance, which can help provide income if your child can’t work because of an injury or disability.
- If your child rents an apartment, help him comparison shop for renter’s insurance and talk about whether or not it’s worthwhile.
- If your child owns, leases, or rents a car, help him comparison shop for auto insurance.
What’s going on with your teen, developmentally?
During adolescence and young adulthood, teenagers:
- Experience many new financial situations like working, earning and managing their own money, opening bank accounts, signing leases, applying for credit cards, and paying for college.
- Practice making decisions based on the financial habits and standards they began to develop earlier in life and continue to develop.
- Use critical thinking to make decisions, set and work towards future goals, and work through challenging experiences or complex tasks.