The Best Money Advice for Teenagers

LifeZette has teamed up with the pros at Dave Ramsey to help answer some of your most pressing financial questions, including how to help teenagers with managing and saving money.

The Bureau of Labor Statistics says 4.7 million American teenagers have jobs.

The teenage unemployment rate in June 2015 was 18.1 percent, still high by historical standards, but better than it was a year before that, when it was near 21 percent.

LifeZette spoke with financial expert Rachel Cruze about teens and managing the income from their first part-time jobs.

Along with her dad, Dave Ramsey, she is co-author of the No. 1 New York Times best-selling book “Smart Money, Smart Kids.”

Question: Let’s say your teenager has secured a job and now has some money coming in. What should a teen be looking for in terms of a bank account and ATM privileges?

Answer: For teens, it’s perfectly fine for them to stay “in network” at their parents’ bank. This is the first account, so perhaps it’s more convenient to bank where Mom and Dad do. Online banking to manage that account is fine, too, as are brick and mortar banks.

Forming good habits connected to managing money is what we’re after at this stage, so it’s much better to set up an account, rather than for a teen to sign over each paycheck earned at that part-time job to Mom or Dad for cash. Take the time to encourage kids to set up accounts of their own.

You want to create as much opportunity for the future as possible, beginning with that first job.

It’s the experience of depositing a paycheck, handling a debit card, and keeping an emergency fund of $500 in the bank – which is an important habit to start early, the emergency fund. We are after good money skills, no matter what amount is earned.

Question: Some teens are interested in investing in the stock market at an early age. When should kids think about investing, if at all?

Answer: It is always more important to save for college and have that emergency fund of $500 in the bank than it is to begin investing. Pile up that money on the side — after gas is put in the tank and auto insurance is paid — and have a nice pad in the bank for college. For most teens, college is the goal. Learning about investing is fine if there’s a natural interest. Maybe Mom or Dad invests and the teen wants to learn about it.

Of course, you hear of those teens with an entrepreneurial spirit who don’t go to college and instead start a business. So they are on a different track. But by and large, most teens will be saving for that four-year haul ahead, ready to help Mom and Dad with costs.

Remember, it is possible to graduate from college debt-free. You want to create as much opportunity for the future as possible, beginning with that first job.

(Note: In most states, legal adult status is reached at age 18, according to classroom.com. Once someone is a legal adult, the process of buying stock is the same as for an adult of any age. However, the strategies used to invest may be different. If the investor is still under 18, he will probably need to get his parents involved to buy stocks.)

Question: Gambling ensnares some teens. What are the financial dangers of this habit, which can so quickly turn to addiction?

Answer: If gambling becomes addictive it can ruin your life. We have all heard of those people who sadly lose hundreds of thousands of dollars, and along the way lose their family, their home — everything. Like other addictions, it’s life-consuming.

That being said, kids may want to put $20 down on a football game. There’s nothing wrong with that, if it’s a small amount and is in good fun.

If they’ve earned the money, it’s their prerogative — we are hoping for good monetary discretion from our teens, and that means making their own decisions. If kids earn their own money, they have more skin in the game in terms of spending it wisely.

Question: In today’s economy, some teens are working to help the family with basic bills and perhaps do not see a bright future ahead for themselves. What would you say to them?

Answer: When teens contribute to the family in this way, it is certainly hard, but they are shaping their character through those efforts. What they’re doing now might be hard, but the qualities they’re building will open doors for them and serve them well their whole working life. They are showing maturity and love for their family through their sacrifice.

They should never give up. And good for them for being so responsible and mature. Good things are ahead for them