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6 misconceptions teenagers have about money and how to fix them.

Teenagers are infamous for wanting their independence but few realize just how much responsibility comes with being an adult, especially where finances are concerned. There is little in the way of financial education within the Canadian school system although measures are being taken to change that. Personal finance education is for the most part left up to the parents to handle. Without the guidance and money lessons from a young age, children may have a harder time understanding and adapting to a life where they focus on saving rather than spending.

Here are 6 of the biggest money misconceptions teenagers tend to have:

1. Mom Will Pay For It

Parents who give in to their children’s wants are not doing anyone a favor. Kids as young as five years old can learn basic money lessons, which will make a difference in their adult lives. Children who have things handed to them may tend to carry the belief that even when they are older their parents will handle their money needs. This may perpetuate the belief that teens do not need an education on personal finance matters since mom and dad always come to the rescue.

Possible Solution: Parents should discuss financial boundaries with their teens such as committing to finance basic needs but insisting teens pay for things outside of that realm. Older teens can be encouraged to seek part time employment or odd jobs to earn the money they need.

2. I Don’t Need Good Credit


Teenagers that have not learned basic lessons about credit scores and why they are important to one’s financial life will likely have no interest in maintaining them. There are still some adults that spend reckless and overextend their credit without much thought to the long-term consequences. Kids tend to mimic how their parents handle money matters and if they see their parents not managing their credit, they likely will see little benefit in doing it for themselves.

Possible Solution: Teens who have established a credit history should review the information contained in the reports with their parents. Establishing an understanding of the way credit works and its importance in adulthood is a valuable lesson. Teens without a credit history should have the opportunity to look at a sample report or a copy of their parent’s information to gain an understanding of the responsibilities that go along with credit.

3. It’s My Money to Spend

Teens that have not learned the value of saving money from an early age may have difficulty accepting the lesson at a later stage in life. A good rule of financial stability is to pay yourself first by depositing a percentage of your cash into a savings account at regular intervals. Teens who are not used to stashing away that percentage may find it hard to part with the money they have earned. Those without the knowledge of basic budgeting techniques are also likely to spend cash recklessly without much thought. Impulse buys and frequent spending will likely result in the teen being cash poor and in debt to mom and dad.

Possible Solution: Establish a bank account with a child at an early age and encourage at least 10% of funds received to go into that account. This percentage rule should also include money received as gifts, from a job, or from allowance funds. Accompany the child to the bank and teach them how to fill out the deposit forms and reconcile their savings register. As children get older, they will already have incorporated the good habit and will likely stick with it through their adult life.

4. I’m Not In Debt

There are few teens who realize the realities of debt. But kids who have not been taught to budget and tend to spend all of their money will likely borrow cash from friends and family on a regular basis. These bad habits can perpetuate a situation later in life where spending gets out of control when young adults have access to credit cards and other types of financing. Relatives and friends who enable a teen to borrow funds for reckless spending are not teaching any valuable lessons.

Possible Solution: Budgeting a teen’s income can make all the difference in their ability to control spending and add value to the logic of living below one’s means. There are plenty of simple budgeting worksheets available online that parents can use to teach pre-teens how to prevent overextending their finances when they become older. Budgeting allows kids to see a visual of their money and can help them make better financial choices.

5. I’ll Definitely Make a Lot of Money

Teenagers are often commenting about how great of a job they will get after graduation. However, they fail to realize that many entry level jobs are of the low-paying variety. Many teens also feel they will have no problem earning a great living despite the fact their school grades are poor and their chances at higher education may be slim. Teens also may have difficulty truly understanding the financial obligations they will have in the real world that will evaporate their small paychecks.

Possible Solution: Parents can help kids review different career choices and research starting salaries for each. Additionally, a good overview of the financial responsibilities that come during and after college graduation will be essential to show teens how unrealistic their money expectations are as well as how important good grades and financial stability will be in the near future.

6. I Know All I Need to Know

One would be hard-pressed to find a teenager who doesn’t have a touch of the know-it-alls. When it comes to money matters, teens may feel they know everything they need to know. They may feel this way largely because they have no concept of the complexities still to learn about money. Teaching an older teen even basic financial lessons can prove frustrating especially when the child has some financial independence from their parents.

Possible Solution: The older a child gets, the harder it can be to instill the right financial tools into their normal habits. This is a primary reason parents should start financial lessons when kids are young. Children as young as age 5 can start grasping basic concepts like saving coins in a bank and these lessons can be expanded on and carried through for the rest of the child’s life. While there are plenty of resources available online that can reinforce financial lessons parents are teaching, it is initially up to the parents to start their children out on the right financial path towards adult responsibilities.

This post was written by Eliza Collins, a guest writer specializing in personal finance topics like savings, debt relief as well as credit score improvement. You can read more of her articles at the debt settlement blog.

Article comments

Maggie@SquarePennies says:

Good post! It’s a mark of a mature person (at any age) if they live in the real world instead of these fantasies. The earlier they learn it the better!

young says:

@Maggie- Definitely! Thanks for reading 🙂

Part of the problem is that teens are not taught how to handle their money properly by their parents (in general) or by the school system. Yet they also have mistaken notions about the kind of lifestyle they can live versus what they want to live. I’d suggest “The Millionaire Next Door” as a tool to use to try to change their perception of what it actually means to be “well off” and the personal discipline required to reach that status.

young says:

@Dividends for the Long Run- Very true- I think it should be implemented into the school system asap, as a mandatory subject. It’s so important and I think educating our young is a way to prevent what happened in 2009 (and now).

Kris says:

I guess this doesn’t really apply to teenages, but to young adults,

How about the myth that 7$/hour is a lot of money (when you don’t have to pay for housing, transportation, clothing, cell phones etc.) Once kids turn 18, they should either be in school, or paying a share of rent/cell phone/food etc.

Artificially inflating their lifestyle by paying for basic necessities just sets them up for failure. I’ve had relatives go from minimum wage to 50k/year accounting jobs and go into debt because they thought their spending money would go up when they got a ‘real’ job and move out, I also have a cousin who isn’t moving out because it would take a huge salary to have the lifestyle he has now living at home, and being able to have 100% of his income (1500$/month) go towards discretional spending…

and ever heard a 25 year old complain that his parents are actually going to cut him off their cell phone family plan… and it’s going to cost him a fortune to have all the bells and whistles it had?

young says:

@Kris- I totally totally agree. It’s embarassing, I don’t know how 25 year olds have any dignity when their parents are still paying for their cell phone plans? I think the term we would call this is enabling! Parents are enabling their children by paying for basic necessities despite having their children work.

I think it is sad that kids don’t know where money comes from. It is the parents fault for sure on that one. I understand if they are little and have a mixed idea on it — but teenagers, come on. I never once thought my “mom would pay for it.” I grew up in a poor household and if I wanted something I had to save my pennies for it. My kids will know that money doesn’t grow on trees–and even if I have it to give to them, I will make them earn it before just handing one of them a credit card.

Great post!

This definitely takes me back to my teenage days.

I remember getting $5 a week from my parents for “allowance” but usually this money was made in a bi-annual payment straight into my bank account. Same with any cash gifts from relatives throughout the year.

I remember being so scared in high school that I would not have enough money to attend post secondary. I worked part-time at fast food chains and tutoring other students – whatever I could do, to save enough cash for tuition and living expenses.

My sisters are the same, as well. And this gives me hope for the next generation of kids growing up.

young says:

@fabulouslyfrugirl- So you got $10 every two weeks from your parents? Did you get to spend that money as you pleased? I didn’t even get allowance from my parents. I did get paid to do some pretty non-fun things as a 15 year old, which has inspired a blog post! Thanks fabulouslyfrugirl!!

Good for you to save up money tutoring and working part time through school. I’m a HUGE advocate for working during school- I think it gives more discipline and forces you to be more time management oriented.

I agree with Little House. There is so much distraction these days that it is really hard for kids to get sucked in by it and waste their money. There also seems to be a flux in the job market as to what skills are needed to actually get a job. So many kids get lost in university and end up spending money on a degree they can’t use. Parents need to do the up most to help their kids and set a good example with money management.

The Wealthy Canadian says:

Awesome post!

I think #1 hits home and can also be synonymous with “But everyone else has one!”. Whether I’m out shopping for groceries or passing by I often hear kids whining because the phone they have “sucks” and they deserve the best smartphone because their classmate has a 32GB iPhone that can record movies.

I have no issue with kids getting the best of the best if they’re willing to work for it. My brothers and I mowed lawns in our early teens during summers. We would buy whatever we wanted with the money we earned and our parents were supportive of it.

I admire kids who do paper routes and just this past summer, I saw a kid that had his bicycle rigged up to tow a lawn mower on a mini trailer. If I only thought of that back in the day!!

Today however, I’m staring to see parents “helping” their kids with paper routes. The father for example will drive with the papers and the kid will deliver a few at a time and come back periodically to the vehicle to get more….jeepers.

Little House makes a great point in that parents need to be involved by teaching good financial concepts and lead by example. If parents are irresponsible, kids can often embrace these bad behaviors.

Little House says:

This is great advice. I think in some ways it’s more difficult to be a teen today; there’s so much stuff they want due to advertising and media. It’s also harder for them to get part time jobs, so they really don’t have an idea about earning money through work. Parents really need to lead by example and sadly many are doing a poor job when it comes to finances.

young says:

@Little House- For sure, Little House. It is difficult with media being so prevalent in our society and influencing the young adults/ teenagers out there. Bullying doesn’t help too! You don’t want your child bullied because he or she doesn’t have the newest gadget, but at the same time you don’t want to give in to their wants/whines.

I taught a business class last year, and all I can say is good luck trying to teach teenagers about money. Who needs life insurance when you’ll live forever? I can afford a 50K truck if I take out an 8 year car loan – I did the math! How can the government take away that much money from me! (ok, so this could also be me on any given payday, but I think I at least understand the principle behind it). It’s pretty crazy how clueless some are.

young says:

@T.M.- Hhahaha…”who needs life insurance when you’ll live forever”. Well, teenagers DO inherently have that notion of them being immortal. Did you set them all straight in the end? I think teaching teenagers ANYTHING will be difficult, let alone money. Though teaching teenagers about money is so essential.

Kids also don’t know where money come from. I guess this applies more to smaller kids, but I think it’s good to let them know that mom and dad work hard for the money and it doesn’t come from the ATM.
It’s my money to spend – I’ll try to teach the kid how to save and also teach the concept of matching. I plan to match his earning with Roth IRA contribution! We’ll see how it goes. 🙂

young says:

@retirebyforty- That’s a fantastic idea, retireby40! But you’ve got a long way to go before you’ll need to do that. I like the idea of teaching the child to save 30%, spend 30% and save another 30% for something in the near future.

Juan says:

It seems like a large part of all of this could just be remedied with some real world experience. Give a teenager a job and a car that needs to be paid for and then pretty quickly they are going to learn some real lessons about money.

young says:

@Juan- Definitely Juan. I started working when I was 14 (not even legal age to work in Canada hah) and I am the most savvy with money out of my siblings.