As our students evolve from little kids to teens, we begin to realize how little time we have left to teach them what they need to know – and just how much there is still to teach. Before we know it, they’ll be crossing that stage, clutching their diplomas, and stepping out into the next phase of their lives. They’ll be full-fledged adults in the adult world… but will they be prepared for the challenges and unknowns they will face?

The American Academy of Child & Adolescent Psychiatry offers parents both a comforting note and a cautionary reminder

“Adolescents need many skills in order to successfully achieve their goal of increased independence. Some adolescents do not make this transition smoothly. Their movement toward independence can cause stress and grief for parents and families. Some aspects of this rough transition are normal and, while stressful, should not alarm parents.”

Nothing is more stressful and alarming to parents than to see their teen making poor choices—and some of the most difficult to watch are bad financial decisions. It is a big task to teach your kids about money management, their financial future, and how early choices can affect their lives for years to come. 

Before you panic, take a deep breath and check out these tips for helping your teen prepare for young adulthood! From  training them in best monetary practices to financially preparing yourself through things like ESAs, see how you can set your kid up for success!

Life Begins Now

The teenage era is one of experimentation, excitement, and testing their independence. This usually includes a string of questionable financial decisions. From peer pressure to doubtful priorities, most teens have an easy time spending their money with little thought for the future. 

Ramsey Solutions notes, “These days, Gen Z teens are spending about $2,600 each year. Yikes. While it’s perfectly fine for young people to have fun with their money, teens are old enough to stop blowing every last dime on ‘stuff.’”

Ramsey Solutions then notes some of the most common expenses for American teens. These include:

  • Fancy coffee (often a status symbol)
  • Trendy clothes, shoes, and even cosmetics (again, often status symbols)
  • School dances 
  • Cars and accessories (more status symbols; also often very cool)
  • Video games/consoles
  • Expensive dates

This list is by no means exhaustive, but it is a good sampling of poor financial choices.

While there’s no harm in having fun, having nice things, or even spending a little bit of money on your crush, more than likely, none of these are investments for the future. Spending a large amount of their financial resources on temporary gratification sacrifices future financial security. 

Sagevest Kids recognizes the challenges during this time. “With peer pressure at its peak, these are challenging years. Kids are focused on virtually everything, making comparisons and being compared by others. While you want your kids to fit in, you need to find a balance to set realistic life expectations.”

As parents, we should encourage our teens  by teaching them about finances, including how to balance their pleasurable spending with an eye on their future. Saving early can prevent them from struggling while in college, while they’re learning through an apprenticeship, or even throughout a tedious job search. If they hope to move away from home after graduation, a nest egg is really a necessity. 

Financial Strategies

As parents, we can take our interest in our kids’ financial futures to the next level by getting involved ourselves. Higher education costs a lot, and assuming your kid hopes to pursue college after high school, you might choose to help them out financially. If you’re like most people, you don’t have piles of expendable income sitting around waiting for an opportunity to spend, so planning ahead and strategizing is your best bet.

This is where participating in a specific education-saving program might come in handy!

Saving For College examines some common options parents have available to them. They include:

  • 529 Plan
  • Mutual Funds
  • Custodial Accounts
  • U.S. Savings Bonds
  • Roth IRA
  • Coverdell ESA

These programs allow parents to take advantage of specific benefits, such as tax deductions and investment opportunities while saving for their child’s future education. The options can be a bit overwhelming, but there’s really no right or wrong answer. 

Citizens Bank offers parents this bit of advice, “At the end of the day, which college savings account(s) you choose to use comes down to personal preference.”

Let’s briefly review some simple pros and cons of each option. 

529 Savings Plan


  • High contribution limit
  • Easy to open and maintain
  • Tax-free withdrawals
  • Contributions are eligible for tax deductions


  • Limited investment options
  • Fee variations/added fees for withdrawals that don’t qualify under eligible education expenses
  • Earnings subject to income taxes 
  • Changing investment options is restrictive

Mutual Funds


  • Doesn’t have to be used for education
  • No investment limit


  • Subject to income taxes
  • Capital gains apply

Custodial Accounts


  • Can be used for anything benefitting a minor. Not limited to education 
  • No investment limit
  • Set up in the child’s name


  • Transfers from parental to child’s control when the child reaches 18 years of age
  • Subject to “kiddie tax” laws
  • Qualifies as student assets on the FAFSA, possibly reducing their student aid package by 20% of the account value

U.S. Savings Bonds


  • Federally tax-deferred and state tax-free
  • Easy to obtain, backed by the full faith and credit of the federal government
  • Extremely low purchase options available 
  • Steady, guaranteed rate of return


  • Impractical for monthly college fund contributions
  • Fairly low investment limit ($10,000 for single investors, $20,000 for married investors)
  • Interest exclusion phases out at certain income levels
  • Proceeds must be used on tuition/fees or be subject to income tax

Roth IRA


  • Can be withdrawn at any time 
  • Premature withdrawals for education expenses exempt from early withdrawal penalty
  • Wide variety of investment options


  • Income limit in order to maximize investment amount
  • Withdrawals for college considered base-year income on the FAFSA and subject to tax
  • Reduces retirement fund

Coverdell ESA


  • Tax-free withdrawals for qualified education expenses (both K-12 and college)
  • Variety of investment opportunities


  • Contributions must be made before the child is 18, and must be used before they turn 30
  • Income cap in order to invest

Investing ahead for your child’s college opportunity is one way you can aid them in a secure financial future. Many parents choose to do this and help their kids avoid college debt, while others prefer to help their kids make wise education choices based on their own financial merit. 

Whatever path you choose, your child will benefit from your interest in their well-being and emotional investment in their future. 

Education Options and Future Plans

Whether you’ve chosen to help your child financially after high school or not, you can guide them in the right direction by assisting them in making good financial choices as they move into adulthood. 

Many young people make critically bad decisions during this crucial time. These choices affect their financial stability for literally years or even decades. Parents can nurture good decision-making and offer their wisdom and experience. 


So your kid wants to pursue a new level of education post-high school. Good for them! But, they may need some extra guidance when deciding what this looks like for them. 

Surprisingly, there are a variety of options for new adults beyond the traditional college route. From a gap year to trade school, help your kid explore all their options before deciding which path they want to take to further their education. If they’re still in high school, explore a dual-enrollment program to give them a head start.  

Encourage your young adult to define their goals and motivations. Trade schools typically offer a viable, reliable long-term income for a fraction of the average cost of college, but a trade isn’t for everyone. 

If college fits their bill, make sure you help them consider some key financial points:

  • Choose the right major. Many college degrees purport to offer financial security in the workforce, but many prove to be financially dubious at best. 
  • Choose the right college for the right reasons. Don’t waste money, obtain unnecessary debt, or add extra living expenses for careless reasons. 
  • If a student loan is involved, pay attention to all the details. From how much money you’ll actually need for your schooling to the repayment terms, don’t make a mistake that will cost you dearly for years. 

Future Plans

If your kid doesn’t believe that college or a trade school is best for them, help them develop a plan for after graduation. Discuss their goals and how they can achieve them without making financial mistakes.

If they’re interested in a career that doesn’t require a degree, help them look for paid internships, an apprenticeship, or a workforce training program. 

The bottom line is that starting their adult life with a solid plan can help them avoid mistakes and added financial strain. Even if what they decide on isn’t their life-long goal, having a stated objective and general plan to get them from point a to point b will help them avoid financial insecurity. 

Prepare, Guide, and Release

Preparing our kids for the financial decisions they’ll face is crucial to their financial success in adulthood. This can start at a very early age and continue through their teen years. Guiding them through the early decisions they’ll face as a young teen and during high school helps develop their sense of discretion and exercise their money management skills. 

This is all prep work for the real challenge all parents eventually face: releasing our kids to adulthood when the time comes. Through diligence, wisdom, and lots of love, we can give our kids a solid foundation for financial success in our crazy world. 

This article is the 3rd in our 4-part series on teaching finances. Click if you missed Part 1 & Part 2. Or visit, Technology: An Open Door to Financial Literacy to read the conclusion of the series.

Make a difference.

Run for school board.

Free course. Enroll today.


  1. […] 1. Check out Part 2 here. And if you missed part 3, Setting Your Teens Up for Financial Success, click here to catch […]

  2. […] catch the first part, click here to read, Everyday Tips for Teaching Money Management. Or click here to move on to the third part, Setting Your Teens Up for Financial Success, and keep […]

Leave A Comment