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How to Talk to Your Teenager About Money — Even If You’re Bad at It Yourself

Editorial Note: The content of this article is based on the author’s opinions and recommendations alone. It has not been previewed, commissioned or otherwise endorsed by any of our network partners.


Talking about money may be complicated, but talking to a teenager about anything can be a minefield. Combine the two and you’ll almost certainly find yourself faced with eye rolls and resistance. But having open conversations about money can help foster a sense of financial awareness that will benefit your child in the long run.

And what if you’re hardly an expert yourself? Maybe your credit score has fallen in recent years or you’ve never successfully balanced your checkbook. All is not lost — with a little forethought, you can still impart financial wisdom through daily activities.

“There are so many opportunities to talk about money every single day,” said Nicole N. Middendorf, wealth advisor and CEO at Prosperwell, a financial planning firm. “When you’re out spending money, or the kids need equipment for sports, or even lunch money, you can discuss how to make money or where all the money is coming from.”

Make a list of broad topics you’d like to cover over time, and broach each subject when it seems appropriate. Creating these goals ahead of time can help you make sure you touch on all the financial concerns you want your child to be aware of without making them feel like they are being bombarded with parental demands.

What exactly should you discuss?

How to budget

Why it’s important: Budgeting is the cornerstone of a sound financial future. Yet, 34% of Americans said they don’t have a budget and, of those who do, 70% said they struggle to stick to it.

How to address it: Consider giving teens a fixed amount of money for lunch each week. If they want a more expensive meal or snack one day, they can opt to bring lunch from home another time. “Little lessons such as this go a long way in helping prepare for larger budgeting decisions in a few years,” said Brian Walsh, CFP and Manager of Financial Planning at SoFi, an online lender.

If your teen has a part-time job or side hustle, like selling artwork or babysitting, you can use their income to develop an more detailed budget. This can even work if you provide an allowance or cover the majority of your teen’s costs. “Even if the parents are paying for everything, it’s good to have kids work through a personal budget for themselves,” said Heather Reihs Keller, a volunteer instructor at My Money Workshop, a financial literacy organization serving the New York tri-state area.

Online checking accounts also make it easy for kids to have a record of their spending. But it’s still important to show teens how to track where that money goes. “Make sure teens understand the credits and debits and how things are going in and out of their accounts,” Middendorf said.

How to control spending

Why it’s important: Creating a budget is one thing, but learning to follow it is a whole new beast. According to a recent survey by Piper Jaffray, teens claim to spend $2,600 a year.

How to address it: Impart financial lessons while you’re shopping together, so teens can see smart money decisions in action. “If you’re back-to-school shopping, provide a set amount of money you’re willing to spend and teach your teens about trade-offs,” said Walsh. For instance, your teen can choose to buy a single pair of name-brand sneakers for $100, or – sneakers, a backpack, sunglasses and a shirt – by bargain-hunting and making smarter choices.

Reihs Keller also noted the importance of comparison shopping and how delayed gratification can pay off in the long run. “I try to never pay full price for anything,” she said, adding that she always looks for ways to save money on whatever she’s buying.

She recommended advising teens to shop online to find better prices on items they first spot in a brick-and-mortar retailer. Though she may be preaching to the choir — teens are becoming increasingly savvy about looking for savings online, with 50% preferring Amazon for their online shopping.

However, parents can help by introducing them to programs like eBates, which can help teens earn cash back on purchases when they shop online at select stores.

How to earn money

Why it’s important: While it’s good to let teens practice budgeting with money parents provide, you’ll also want to foster an appreciation for a hard day’s work. When teens start earning their own money, there’s a whole new set of financial lessons to teach.

How to address it: “Explain their paycheck and withholding taxes to them,” Middendorf said. “What seems like a lot of money, at first, may not be that much.”

For teens too young to work — or if job options are limited in your area — your teen can find other ways to earn money. “Help your teen develop a side hustle,” advised Walsh. “Help them think through creative ways [to earn money], such as mowing lawns, shoveling snow or selling unused goods.”

John O’Rourke III, vice president and Private Banking and Wealth advisor for First American Bank, in Coral Gables, Fla., also recommends paying for chores your teen can do around the house. “My siblings and I were paid our allowance at the beginning of the month, and a portion went right into our savings account for clothing. The rest was our ‘play money,’ for movies, candies, or toys.”

The trick to leveraging an allowance to teach teens about adult life? Show them that if they spend their whole allowance, they aren’t getting more money from you; they will have to find a way to earn more.

In adult life, this can translate into a tough lesson on frugality — or an incentive to find ways to make more money. “I learned to wash cars and mow lawns,” O’Rourke said. “It was a valuable lesson — hard at times, but valuable.”

How to save

Why it’s important: Of course, as the old adage goes, “It’s not what you earn, it’s what you keep.” Teaching teens the importance of savings can help set them up for a life where they aren’t living paycheck to paycheck. Instead, they will have a buffer for emergencies, investment opportunities, or even spur-of-the-moment experiences like trips and concerts. “If you can get your child into this habit from the start, you’ll be setting them up for future success,” O’Rourke said. “It’s empowering and comforting to know you have some money set aside.”

How to address it: “If there is a major purchase they want to make such as a trip, car or new phone, use it as an opportunity to help them plan ahead,” Walsh said. “If they are old enough, help them apply for a job and connect their earnings back to their savings goal.”

You can establish an online savings account and help them set up automatic transfers from checking to savings every time they get paid. “For every dollar they earn, encourage them to save 30 cents of it, and don’t put any limitations on the other 70%,” O’Rourke advised.

For teens who aren’t working yet, an old-fashioned piggy bank helps teach the concept of saving. “Spare change adds up quickly,” Reihs Keller said. Tie savings into a long-term goal kids can work for, whether that’s a set of high-end headphones, a car or college.

And don’t be afraid of instilling knowledge through small soundbytes. “Pay yourself first,” is a common mantra used by finance pros. Although cliches like this may elicit an eye roll or a groan, teens are likely to internalize these phrases, even repeating them to their own children years later.

How to pay for college

Why it’s important: “One of the biggest mistakes parents make is not speaking to their children about college costs and who is going to pay for it,” Middendorf said.

With student loan debt in the U.S. at nearly $1.6 trillion, not discussing how to pay for college is a huge oversight that can leave young adults in a financial hole when they should be getting ready to live on their own.

How to address it: “When you’re discussing college costs with your child, be very transparent and share the total investment being made into their education,” O’Rourke said.

If you’ve saved for them, either in a 529 plan or other savings vehicle, start by discussing how much has been put aside and helping them do the math to see how much of their tuition and living expenses is being covered. It’s important for teens to know how much they will need to earn, save, or borrow to make up the difference. Even if the picture is bleak, at least they will be prepared.

Also help them break down the total costs of student loans they might need to take out, and how long it will take them to pay off that debt. Once your teen realizes the financial costs and responsibility attached, he or she might decide to opt for a less expensive school or to spend two years at community college first.

Bottom line

Parents can find teachable money moments every day. You can have a family saving contest, putting money in glass jars to see who can save the most over six months, or have family game nights with old standbys like Monopoly where you can walk them through buying, spending and earning passive income.

Regardless of your approach, you can help your teens build a strong financial base by showing them how to budget, earn and save. Set an example by establishing these good habits yourself, and you may even find your own financial future looking brighter, too.

Advertiser Disclosure: The products that appear on this site may be from companies from which MagnifyMoney receives compensation. This compensation may impact how and where products appear on this site (including, for example, the order in which they appear). MagnifyMoney does not include all financial institutions or all products offered available in the marketplace.

Dawn Allcot
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Dawn Allcot is a writer at MagnifyMoney. You can email Dawn here

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How Fed Rate Hikes Change Borrowing and Savings Rates

Editorial Note: The content of this article is based on the author’s opinions and recommendations alone. It has not been previewed, commissioned or otherwise endorsed by any of our network partners.

Since late 2015, the Federal Reserve has raised the upper limit of its target federal funds rate by 2.25 percentage points, from 0.25% in December 2015, to 2.50% for much of 2019.

But the Fed is no longer raising rates. The question now is whether the Fed will continue to make cuts in the federal funds rate like the first two 0.25 percentage point reductions in July and September 2019, which lowered the federal funds target rate from 2.50% to 2.00%.

Previously MagnifyMoney analyzed Federal Reserve rate data to illustrate how the rates consumers pay for loans and earn on deposits have changed since the Fed started raising them two and a half years ago. Now, with the Federal Reserve embarking on a series of rate cuts, we’ll be tracking that effect on rates as well.

  • Credit card borrowers are currently paying $113 billion in interest annually, up $34 billion from the annual $79 billion they paid prior to the first Federal Reserve interest rate hike in December 2015, making introductory 0% APR deals all the more attractive.
  • Meanwhile, depositors earned significantly more from savings accounts. In the 12 months ending in June 2019, depositors earned $39.3 billion in interest on their savings accounts, up $29.3 billion from the $10 billion they earned in 2015.
  • According to our analysis, credit card rates are most sensitive to changes in the federal funds rate, almost directly matching the rate change with a 3 percentage point increase since December 2015. Credit card rates will continue to rise in line with the Fed’s rate increases, and if the Fed raises them again, the average household that carries credit card debt month to month will pay over $150 in extra interest per year compared with before the Fed rate hikes began. MagnifyMoney estimates 122 million Americans carry credit card debt month to month.
  • Student loan and auto loan rates have also risen — but by less than half as much as credit card rates — in part because they are long-term forms of lending that are less reliant on the short-term federal funds rate. Federal student loan rates are set based on the 10-year Treasury note rate each May.
  • Savers at big banks have seen little change, with the average savings and CD account passing through only a fraction of the rate increase. However, that masks a big opportunity for savers who shop around and move deposits to online banks. Online banks have aggressively raised rates, and now often offer rates of more than 2%, versus just 1% in 2015. That’s over 20 times what typical accounts pay.

In addition, MagnifyMoney also looked at the impact on consumer rates the last time the Fed reduced rates in 2007.


Generally, unsecured loans like credit cards and personal loans are more rate-change sensitive than secured loans like autos and home mortgage rates, no matter the direction of the rate change. However, savings products like Certificates of Deposit are a stark exception. Even after 3 years of fed funds rate increases, CD rates generally languished at rock-bottom rates until very recently, and then only increased modestly, relative to other financial products. Compare that to 2007, when it was the product most sensitive to interest rate cuts.


Let’s take a closer look at how the Fed rate hike impacts different financial products:

Credit cards

Most credit cards have a rate that’s directly based on the prime rate, for example, the prime rate plus 9.99%. As a result, card rates tend to move almost immediately in line with Fed rate changes. In the current cycle, the rates on all credit card accounts tracked by the Federal Reserve have increased 3 points, even more than the Fed’s increase of 2.25 points.

Although it’s too early to tell, we expect a similar decline in credit card APRs as the Fed continues to pare rates. And consumers can still find attractive introductory rate offers.

For example, introductory 0% balance transfer offers have continued to have long terms even as the Fed hiked rates, with offers still available for nearly two years at 0%.

Credit card issuers make up for the rate hike with the automatic rise in variable back-end rates, as well as the increasing spread between the prime rate and what consumers pay on new accounts. They can also increase other fees, like late payment fees or balance transfer fees to keep long 0% deals viable.

The Federal Reserve tends to hike up interest rates gradually over time. And people in credit card debt will barely notice the rate increase in their monthly statement. When rates are increased by 0.25%, the monthly minimum due on a credit card will increase $2 for every $10,000 of debt.

Similarly, monthly minimums may decline with rate reductions – though cards typically have monthly minimum payments of at least $20. But making minimum payments could mean years of paying off credit card debt and accumulating interest. The best ways to lock in lower rates are by leveraging long 0% balance transfer deals or by consolidating into fixed rate personal loans.

Savings accounts

On average, savings account rates haven’t changed much since the Fed started raising rates. That’s largely because big banks with the biggest deposits and large branch networks have less incentive to offer higher rates, and this skews national data on rates earned because most savers don’t shop around to find higher rates at online banks and credit unions.

Consumers who shop around can find much higher savings account rates than three years ago, and shopping around for a better rate on your deposits is one of the best ways to make the Fed’s rate hikes work in your favor.

Back in 2015, it was rare to see savings accounts pay 1% interest.

Today, many online banks are competing for deposits by offering savings account rates in excess of 2%, flowing through about half of the Fed’s rate hike into increased rates for depositors. These rates will continue to rise as the Fed hikes rates. The increases are already apparent in the data. Depositors are currently earning more than $39 billion in interest on their savings accounts annually, versus $10 billion in 2015.


CD rates have moved faster than savings rates, up 0.41 points for 12-month CDs since the Fed started raising rates. That’s in part because they are a more competitive product that forces consumers to rate shop when they expire at the end of their 6-month, 12-month or longer term.

But that rate rise doesn’t fully reflect what some smaller banks are passing through, as the banks with the largest deposits have been slow to raise rates.

Recently rates on 1- and 2-year CDs at online banks had been increasing rapidly to well over 2%, reflecting much of the Fed’s rate increases since 2015. The rates on 5-year CDs also began to increased, with some banks offering 60-month CDs with rates above 3.00%. Although rates have started to recede from those highs, CD rates are still well above their 2017 levels.

One reasonable strategy would be to invest in short-term (1- and 2-year) CDs. If competition on the short end continues, you can get the benefit in a year on renewal.

Student loans

Federal student loan rates are set based on a May auction of 10-year Treasury notes, plus a defined add-on to the rate. Today, rates for new undergraduate Stafford loans stand at 4.53%, up from 4.30% before the federal funds target rate began to rise.

Since student loan rates are determined by the 10-year Treasury rate, rather than a short-term rate, they are less directly related to changes in the federal funds rate than some shorter-term forms of borrowing like credit cards. Instead, future market views of inflation and economic growth play a role. Federal student loan rates are capped at 8.25% for undergraduates and 9.5% for graduate students.

For private refinancing options, rates depend on secondary markets that tend to follow longer-term rates, rather than the current federal funds rate, but in general, a rising rate environment could mean less attractive refinancing options.

Personal loans

Personal loan rates tend to be driven by many factors, including an individual lender’s view of the lifetime value of a customer, funding availability and credit appetite. Most personal loans offer fixed rates, and in a rising rate environment overall, we expect these rates will go up, making new loans more expensive, so consumers on the fence should consider shopping for a good rate sooner rather than later. Since the end of 2015, rates on 2-year personal loans tracked by the Federal Reserve have increased by 0.24 basis points.

Auto loans

Prime consumers who shop around for an auto loan can still find very low rates, especially when manufacturers are offering special financing deals to move certain car models.

But the overall rates across the credit spectrum have gone up since the Fed raised rates, in part due to the rate hikes and because of recent greater than expected delinquencies in some parts of the auto lending market.


Since the Fed started raising rates in late 2015, the average 30-year fixed mortgage is now sightly lower than the 3.90% rate in December 2015. The mortgage market tends to follow trends in longer term bond markets, like the 10-year Treasury, since mortgages are a longer-term form of borrowing. That shields them from the impact of Fed rate hikes, and it’s not unusual for mortgage rates to decline during some periods when the Fed is raising rates.

What can consumers do

Even if rates are no longer going up, life is still expensive for debtors, and more rewarding for savers than in recent years.

If you are in debt, now is the time to lock in the lowest rate possible. There are still plenty of options at this point in the credit cycle for people to lock in lower interest rates.

If you are a saver, ignore your traditional bank and look online. Take advantage of online savings accounts and CDs to earn 20 times the rate of typical big bank rates.

Advertiser Disclosure: The products that appear on this site may be from companies from which MagnifyMoney receives compensation. This compensation may impact how and where products appear on this site (including, for example, the order in which they appear). MagnifyMoney does not include all financial institutions or all products offered available in the marketplace.

Nick Clements
Nick Clements |

Nick Clements is a writer at MagnifyMoney. You can email Nick at [email protected]

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Survey: Most Millennials Believe They’ll Become Wealthy Some Day

Editorial Note: The content of this article is based on the author’s opinions and recommendations alone. It has not been previewed, commissioned or otherwise endorsed by any of our network partners.

It seems like everyone has an opinion about millennials these days, but perhaps what they should be saying is that they are confident and optimistic. MagnifyMoney has surveyed more than 1,000 Americans on their views about wealth, and we found that millennials have a remarkably positive outlook when it comes to the subject.

Compared to the other generations surveyed, millennials are much more likely than older generations to believe that they’ll become wealthy someday. Whether this comes from youthful exuberance, wishful thinking or a healthy attitude toward building wealth is not entirely clear. But what is clear are the striking generational perspectives on wealth revealed by our study.

Key findings:

  • Just over half (51%) of respondents believe they will one day become wealthy, despite only 15% saying that they already are. Millennials are even more confident, with 66% saying they think they will become wealthy in the future.

  • Of those surveyed, 28% think acquiring real estate is the best wealth-building strategy. The stock market came in as the second most popular effective strategy at 19%, while only 4% think investing in cryptocurrency was a good way to build wealth.

  • There were generational differences of opinion on the best wealth-building strategy. Baby boomers are most likely to think real estate is the best way to build wealth, while millennials are more likely than any other generation to say investing in a business is the best wealth-building strategy. Generation X are the most likely to consider the stock market as their top strategy.
  • Unfortunately, 23% of Americans currently are not doing anything to build wealth. On the bright side, 36% are saving for retirement and 29% are investing in the stock market.

  • Millennials prefer to do things digitally. They are the generation most likely to utilize an online savings account. About 30% of millennials use one, compared to only 17% of baby boomers.
  • About 55% of Americans reported believing that being wealthy ultimately means having the ability to live comfortably without concern for their finances. Meanwhile, 43% defined it as feeling financially secure.

What are millennials doing to build wealth?

The two most popular strategies for wealth building among millennials are investing in real estate and in the stock market, but they’re hardly the only generation to take that approach. Across the board, real estate investing and the stock market were named as the two most popular investment strategies.

Still, both the real estate and stock market are subject to fluctuations, such as those seen during the Great Recession. According to a Gallup poll published in May 2019, during the Great Recession of 2008 to 2010, Americans were just as likely to name savings accounts or CDs as the best long-term investments, on par with stocks and real estate. As of 2019, the poll found that Americans currently view stocks and real estate as the best long-term investments.

Of course, this mindset could change quickly if another economic downturn hits. But for now, property owners have cause to celebrate. In 2018, home values were the highest on record, according to Gallup.

That same Gallup poll found that those who actually invest in stocks were more confident in the value of stocks as an investment, though stock ownership remains below pre-recession levels. Note that the S&P 500, which is considered a proxy for the stock market as a whole, has gained 9% per year on an annualized basis over the last decade — that return rises to an annualized gain of more than 11% per year when dividends are reinvested.

Hurdles to wealth building

But even if stock and real estate strategies can be effective, debt may still stand in the way of some millennials’ wealth-building efforts. Due to rising student debt burdens, it’s not uncommon for millennials to carry large amounts of debt.

According to Misty Lynch, a Boston-based resident certified financial planner (CFP) with the savings and investing app Twine, millennials may be too accustomed to debt. “Millennials are used to having debt and feel like it is just part of life,” Lynch said. “This sometimes hurts them if they continue to add to their debt without considering the long term impact.”

Lynch also noted that the glitz of social media can affect millennial finances: “Social media has changed the definition of wealth. It is easier to appear wealthy in this Instagram-era even if your bank account doesn’t back that up.”

Plus, although 66% of millennials believe they’ll someday become wealthy, the survey also revealed that 18% of millennials currently aren’t doing anything to build wealth. For millennials looking to start the process, saving for retirement is a great launching point. One suggestion from Cynthia Loh, vice president of Digital Advice and Innovation at Charles Schwab in Denver, is that if your employer offers a 401(k) plan, you should set up recurring contributions that deposit money from your paycheck. Plus, you should max out annual contributions if you can afford to. The potential match from an employer is an added bonus worth taking advantage of.

For those without access to a 401(k), consider checking out a robo-advisor, which can be great for newer investors. Most robo-advisors have low investment minimums, which makes it easy to start investing your money.

What does wealth mean for millennials?

More than other generations, millennials believe they can become wealthy some day. The survey found that 66% of millennials believe that they will become wealthy compared to only 25% of baby boomers.

As baby boomers are in the 54-72 year age range, their different perspectives make sense. Baby boomers are in the phase of their life where they either have already retired or are nearing the end of their career. They know their potential for wealth building is slowing down.

In general, younger generations seemed to be more optimistic. For instance, Gen Xers are more optimistic than baby boomers, and Generation Z seems to be even more hopeful than millennials.

Youthful optimism aside, perhaps millennials simply have a different definition of wealth than older generations. Across all generations surveyed, 55% said they thought the definition of being wealthy was being able to live comfortably without worrying about their finances. If you’re looking to quantify wealth, 20% of millennials (more so than any other generation) reported that they define being wealthy as having $500,000 or more; only 8 percent of baby boomers feel this way. Networth finds more common ground between millennials and baby boomers — almost 18 percent of both generations feel a networth of at least $1 million signifies wealth.

Andrea Woroch, a money saving expert from Bakersfield, California, thinks that mindset may just be the key to millennial’s future financial success.

“Thinking positively about your money is key toward building better financial habits,” Woroch said. “Ultimately, your thoughts influence your behavior which will lead to a desired outcome, so if you think you will be wealthy then you can start acting in accordance with this vision.”


MagnifyMoney by LendingTree commissioned Qualtrics to conduct an online survey of 1,029 Americans, with the sample base proportioned to represent the general population. The survey was fielded June 24-27, 2019.

In the survey, generations are defined as:

  • Millennials are ages 22-37
  • Generation Xers are ages 38-53
  • Baby boomers are ages 54-72

Members of Generation Z (ages 18-21) and the Silent Generation (ages 73 and older) were also surveyed, and their responses are included within the total percentages among all respondents. However, their responses are excluded from the charts and age breakdowns due to the smaller population size among our survey sample.

Advertiser Disclosure: The products that appear on this site may be from companies from which MagnifyMoney receives compensation. This compensation may impact how and where products appear on this site (including, for example, the order in which they appear). MagnifyMoney does not include all financial institutions or all products offered available in the marketplace.

Jacqueline DeMarco
Jacqueline DeMarco |

Jacqueline DeMarco is a writer at MagnifyMoney. You can email Jacqueline here