Setting Financial Boundaries with Teenagers

The average teenager spends $2,600 per year.

Where is that money coming from?

Probably the bank of mom and dad. . . right?

According to the 2019 JA Teens Personal Finance Survey, 64 percent of teens depend on gifts for spending money, 32 percent get an allowance in exchange for chores, and 22 percent earn spending money by working at a job. 

When it comes to the subject of teens and money, one thing that is easier said than done is setting boundaries, hence the 64 percent of teens who rely on "gifts" for spending money. We asked personal finance experts for advice on setting these boundaries. Here is what they said: 

1. Reinforce wants vs. needs

"With my own kids wanting money (or things that cost money), I remind them that birthdays and Christmas are when they can ask for their 'wants' and that my goal the rest of the year is to fulfill their 'needs.' My oldest has now learned to ask if something is in the budget when we go shopping and she sees something that she wants." 

— Nicole Durham, Owner of Struggle Today Strength Tomorrow, a personal finance blog about budgeting and saving money 

2. Teach about budgeting

"Teenage children asking for money is an opportunity to teach them about financial responsibility. 

Maybe they'll ask for $30 to go out and watch a movie, then grab a burger. 

Give them $120 and tell them that's it for the next month. 

If they come back asking for more in two weeks, decline and suggest they budget more responsibly next month. Schools really don't teach much about personal finance so that burden falls on the parents." 

— Morgan Taylor, CMO and Financial Advisor for LetMeBank 

3. Reward good behavior

"Incentivize good behavior and be more generous when family or friends truly need help, especially when they don't have a history of asking for handouts. Rewarding hard work with a bit of extra financial help can incentivize teens or adult children to continue making good choices. Help friends and family help themselves." 

— Patrick Ford, CPWA®, Director of Wealth Management, Brown Wealth Management

4. Call a spade a spade

As a mother of two teenagers, below are the tips I use to handle these types of situations:

1. Dear daughter, you need to work for the money you want by taking out the dustbins for a whole month. When you work for the things that you want, you will value them more.
2. I simply do not have the money right now to give to you because there are other essential needs that must be provided for. I have to call a spade a spade!
3. What do you need the money for? Can you please add that to your bucket list and wait until I have the money to give to you?

— Deborah Sawyerr, Financial Literacy Educator, Sawyerrs' House, Sawyerrs' House Money Literacy for Kids, Young Adults and Adults Podcast

5. Set up a chore-based economy

"For teenagers, I recommend having an allowance or commission system set up. Some tasks shouldn't be paid since it's part of living in a family. These would be chores such as cleaning up their room, doing their laundry, or helping make dinner. Other chores, including mowing the lawn, mopping or vacuuming the common areas, or babysitting siblings could have set dollar amounts attached for each time they do them.  

This gives your teenager the ability to earn money from their parents instead of asking all the time for a handout. The parents should set up the boundaries that fun activities or shopping for items outside of necessities will be paid solely by them through their saved up allowance.  

Parents can even encourage their teenager to start offering services to neighbors to earn additional income. This will teach them the value of hard work and money even more."  

— Steffa Mantilla, Debt Payoff and Wealth Building Strategist for Plantsonify, a personal finance blog that educates people about getting out of debt and building wealth

6. Suggest a part-time job

"Teenagers should be working to earn their own money by the time they're able to. The first port of call when it comes to spending on things they want, rather than what they need, should be their own money. 

Working for their own money will help them better understand the value of money and what it takes to earn things so that they're more likely to think before spending money in the future."

— Kate Crowhurst, Director of personal finance platform, Money Bites

7. Over-share about finances

"The best advice that I can offer with regard to setting financial boundaries with children is to share more than you're comfortable with. Especially when children reach their teenage years, it's important for them to see how household finances work in a real-world setting, and there's no better way for them to learn lessons than by watching how their parents think about and treat their finances. 

Parents should share as much as they're comfortable with and then some. 

Whatever parents don't spend time talking about with their kids is going to end up being a source of discomfort when their kids have to make uninformed decisions later on, so it's critical to make the list of things you don't talk about as short as possible.

That said, it's important for kids to know that household finances are being shared with them as a learning opportunity — not for any kind of decision-making. Kids shouldn't feel entitled to guide their parents' finances any more than they would want their parents influencing their finances later in life." 

— Dock David Treece, Senior Financial Analyst, FitSmallBusiness.com

8. Consider requests wisely

"When your teen asks you to borrow money, remember that you don't have to (nor should you) say yes right away. 

Ask yourself a few questions: 

• Is your teen responsible? 
• Is this a one-time request? 

If the answers are no, or if you simply don't have the money to shell out, you'll want to have a tactful way to tell them no. 

Explain to your child that you want them to enjoy life but that if they need money, they have to work for it. Whether it be chores around the house or getting a job, remind them that you work hard for your money and that they're old enough to work hard for theirs." 

— Adina Mahalli (MSW), a certified mental health consultant and family care specialist writing on behalf of Maple Holistics

9. Emphasize cause and effect, work = money

"It builds back into all the values you teach them every day. It may be hackneyed, but 'money doesn't grow on trees.' It's an opportunity to emphasize the importance of a strong work ethic by finding tasks or projects that you need doing around your work situation or the home. 

Spoilt brats won't take easily to this approach, but in the long run, it's a vital lesson to be learned — the sooner, the better. 

Give money to your kids but link it to them helping you out in some way. Alternatively, lend them the money and suggest outside jobs to help them pay the loan back. When doing so, direct them toward projects you think will double up as a life-learning experience. If paying jobs are scarce, suggest that community service is acceptable to you as repayment in kind. 

Take your parental responsibility the extra mile by helping them secure work in any way you can. Your sons and daughters will thank you in the long run and gain a sense of purpose or confidence from being independent." 

— Gordon Polovin, finance expert, advisory board member at Wealthy Living Today.

10. Record budget and commitments together

"Setting financial boundaries with teenage children is critically important for them to learn how to start managing their financial affairs. 

If parents can afford it, an allowance is a good starting place for the teenager to know what their fixed income will be. 

Additionally, I strongly recommend that teenagers partake in a part-time job. There is no better way to learn the value of a dollar than to actually earn one. 

From there you can help them to put together a budget. This can include a car note, insurance, auto expenses, entertainment, and savings/investments. 

As a parent, I would be insistent on the teenager living within this budget. I would recommend putting everything in writing with your teenager so there are no misunderstandings, as to the scope of the parents' financial commitment." 

— Michael Gerstman, ChFC, CLU is the CEO of the Dallas-based retirement planning firm, Gerstman Financial Group, LLC

The final word

Before you go, let's just get a little reality check. According to Charles Schwab, "Young adults are accruing significantly more debt, but their savings don't meaningfully increase: on average, young millennials (ages 21 to 25) have saved just 15 percent more than Gen Z (ages 16 to 20) — yet they have 169 percent more debt. Another one-third (33 percent) of respondents say they skipped a meal because they didn't have enough money."

Hopefully, these tips can help parents and guardians educate their children about the value of money — today and in the future.