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Teach Your (Teenagers and College) Children Well…

Earning and handling income

Teenagers and college kids may earn income from part-time jobs. Wages enable children to get a greater taste of financial independence. With this, kids are introduced to the subject of withholdings for FICA/Medicare and federal and/or state income taxes.

Total Wealth Planning Tip: Show your children how this takes a bite out of their paychecks and reduces the amount they have left over for their own use.

Creating a budget

With greater financial independence should come greater fiscal responsibility. Older children may have more expenses, and their extra income can be used to cover at least some of those expenses. To ensure that they’ll have enough to make ends meet, help them prepare a budget.

  • Devise a system for keeping track of what’s spent
  • Categorize expenses as needs (gas for car) and wants (new video game, gym shoes)
  • Suggest ways to increase income and/or reduce expenses… work a few extra hours, buy less Starbucks

Total Wealth Planning Tip: In today’s world, kids do everything on their phones. There are a number of great budgeting apps that can help them start good habits.

Saving for the future

Trying to get them to think beyond today is tough, but showing them the power of compounding can get their attention quickly. Helping teenagers and college children learn about topics such as risk tolerance, time horizons, market volatility, and asset diversification may predispose them to take charge of their financial future. To do this, consider opening an investment account for them.

Total Wealth Planning Tip: A great way to start is by opening a Roth IRA. Contributions allowed are what they can earn from their part-time job up to a maximum of $6,000. You can contribute, or agree to match what they save.

Credit Cards

For those older children, especially those in college, you may be thinking about getting them a credit card. Keep in mind, credit card companies cannot issue cards to anyone under 21 unless they prove the ability to repay or unless an adult cosigns for the credit card.

  • Make sure children understand the grace period, fee structure, and how interest accrues on the unpaid balance.
  • Agree on how the bill will be paid, and what will happen if the bill goes unpaid.
  • Make sure children understand how long it takes to pay off a credit card balance if they only make minimum payments.

Total Wealth Planning Tip: Ask the credit card company for a low credit limit, say around $200 to $500. This will help children learn to manage credit without getting into serious debt. Another option to a credit card is a prepaid spending card which looks like a credit card but instead is loaded with a predetermined amount that you specify, and generally may be used anywhere credit cards are accepted.

For more information about Total Wealth Planning’s approach to multi-generational wealth planning, please visit us at or contact directly Rob Lemmons, CFP®, CPA, AIF®, CEPA at 513-984-6696.

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