How Should a Teen Girl Use Her Money?

Expenses

• By the time she is a teen, in most cases, a young woman should be taking financial responsibility for some aspects of her life. This may be expenses involving the cellphone, clothing or lunches. She should definitely have control over the money she spends on leisure activities and her social life. The teen may have goals for college that she is at least partially responsible for. She may also have specific ideals or charities that she participates in or supports. All of these can be considered expenses and must be taken into account when discussing financial plans. Parents can help their teen budget, but should refrain from bailing her out of money difficulties.

Budget

• Few teens have unlimited income. While she may not have huge expenses yet, it is important that she learns how to make her money cover all her needs. Start by keeping an expense diary for two months. This should include everything she spends money on and all the money she earns, including a job or allowance. After two months, look over the diary with the teen. Highlight those expenses that are necessary. For example, some teens may pay a car note or insurance. Mark other regular expenses that aren̵7;t necessary, like the daily stop at the coffee bar. Help the teen decide how to allocate her money in a budget she can stick with.

Savings

• If the teen doesn̵7;t have a savings account, she should get one. Many banks have special accounts designed for teens and other young savers. Budgeting for a savings account serves many purposes. First of all, it stops the teen from spending everything she makes every month. Help her to see the savings account as a fund to cover expenses if she runs into trouble. In addition, you can encourage her to use a portion of savings to plan ahead for larger purchases. Purchasing an item with money saved is far cheaper than purchasing something on a credit card since she saves credit card interest and fees.

Investment

• For a teenager, retirement seems a million years away. But that isn̵7;t the reality. A 16-year-old who works part time over the summer has almost 50 years to allow that money to grow. Look at the different IRA packages available. Some are strictly for retirement, while others will allow the teen to withdraw money for educational, medical or first-time home-buying expenses. As an immediate incentive, up to $5,000 of the money invested in an Individual retirement account is tax deductible. This may give your teen a larger tax refund right away. In addition, getting into the habit of investing for the future helps your teen get past immediate gratification.