5 Teenage Money Mistakes (and How to Fix Them)

5 min read
Mom and daughter sitting at desk talking about finances

We’re addressing the most common teenage money mistakes and what you can do to guide your older teens so they can start making good financial choices early in life and enter young adulthood with confidence.

Teen Money Mistake #1: Living Beyond Their Means and Without a Budget

If you want your teen to live within their means as an adult, it’s critical you model this behavior yourself. Most teens live in the moment which means they have difficulty seeing too far into the future, resulting in impulsive buying decisions. You can help by setting a good example.

Guiding your teen to avoid overspending by setting goals and a budget:

  • Explain that living within your means is what you do by not overspending beyond the money you already have or know with certainty you will receive.

  • Show your teenager that by establishing very specific goals influences how they set up their budget, which then dictates what they will save and spend money on. Show them that tracking their spending and setting up a budget is simple and easy.

  • Help your teen by talking about the goals you’ve set for your own life, and what financial goals they might want to set for themselves in one year, two years, and five years. 

Teen Money Mistake #2: Spending Every Dollar They Make

Help your teenager understand that by saving at least 10% of what they earn and having at least three months of living expenses saved up for emergencies are among the most important things they can do to build a strong financial foundation for life.

Guiding your teen toward building a "saver" mindset:

  • Ask your teen to track and categorize their spending so they can see exactly where their dollars are going. Ask them what they notice about their spending habits and if they want to make any changes or start spending less in one category to start saving up for something important.

  • Give your teen responsibility for some of their personal living expenses while they’re still living with you, such as paying for their own gas or cell phone plan.

  • Talk about how to keep their emergency savings in a safe place, like a high-yield savings account or an interest-bearing checking account. Explain that they’ll not only receive a good rate of return, but the money will be easy to get to should they need it quickly, and the funds will be FDIC insured up to the maximum amount allowed ($250,000 per depositor for each ownership category).

  • Explain that having three to six months of living expenses saved up can make them feel more relaxed than having only three. (They may not achieve this until they’re working regularly, but it’s important they understand now what they should be aiming for.)

Teen Money Mistake #3: Not Understanding the Difference Between Good Debt and Bad Debt

Not only do credit card companies sell on college campuses, teens could easily wind up overextended on car loans, quick loans, or student loans used to fund an extravagant lifestyle while away at school. Spell out what’s considered good debt vs. bad debt—and the importance of paying off their credit card balance each month.

Guiding your teen on how to tell good debt from bad:

  • Explain that good debt is money borrowed that can increase your net worth or significantly improve your personal wellbeing. For example, a loan on an appreciating asset (such as a home mortgage), or a low interest federal student loan that provides marketable skills and paves the way into a solid career.

  • Explain that bad debt is money borrowed to buy a rapidly depreciating asset (such as a factory-new car, computers, or other technology), or discretionary disposable goods and services (like fast fashion or dining out). Revolving high interest credit card balances are also considered bad debt.

  • If your teen is over the age of 18, shop with them for a credit card. Show them how to compare annual interest rates, fees, as well as any perks or rewards offered.

  • Help them understand that paying bills late, such as a credit card, can quickly damage their credit score which may affect their ability to get a job, rent an apartment, or obtain the lowest possible rate on an auto or home loan later in life.

Teen Money Mistake 4: Trying to Keep Up With Social Media Influencers

Help your teen see that social media is full of self-appointed “experts” who work hard to persuade them to indulge in pricey cosmetics, fashion, and other expensive trends. No matter how convincing or attractive these may appear, resist the urge to match other people’s spending habits, vacation reels, or personal values.

Guiding your teen to shop safely on social media:

  • Help your teen keep their spending aligned with their own values and financial goals by asking them to list and rank these in order of importance.

  • Have your teen track how much time they spend on social media daily, weekly, and monthly, and ask if setting some limits would help them feel better about themselves.

  • Watch for social media spoofing, phony websites, health or beauty scams, and fake scholarship scams. Point out that scammers targeting teenagers are difficult to detect and will attempt to take their money and sell them nothing.

Teen Money Mistake 5: Not Protecting Their Credit Scores, Health, or Property

Let your teen know their credit history and credit scores must be guarded, and that most people buy insurance to protect against loss of health, home, are, and income.

Guiding your teen to keep their credit scores, health, and possessions safe:

  • Stress the importance of paying bills on time. It’s one of the biggest factors of building and maintaining a good credit score. Given they may not have bills of their own right now, if they’re an authorized user on one of your credit cards, ask them to reimburse you for the charges they make at the end of each month.

  • Show them your credit report and help them understand that their credit card spending behavior will be documented and recorded as part of their credit history. With a few exceptions, your teen can stay on your health insurance until they turn 26 years old.

  • Help them establish a pattern of regular preventive care checkups, including vision and dental, while they have access to your health insurance, so they can continue with this pattern as they get older and go out on their own.

  • Make sure your teen is aware that disability insurance offered by many employers can provide income should they become injured or disabled.

  • If your teen plans to rent an apartment after they leave home, talk about the importance of rental insurance and comparison shop providers.

  • Should your teen own or lease a vehicle, go over the details of how an auto insurance policy works. In case your teen needs to rent a car, explain the collision damage insurance (and waiver) and why it may not be necessary if it’s already covered by their personal auto policy, by your homeowners policy, or by the credit card issuer used to rent the vehicle.

The Bottom Line

By talking with your teenager about money, setting a good example, and clearing up the common mistakes and misperceptions they may already have, you’ll help them build financial knowledge and skills they’ll carry with them for the rest of their lives. Empowering teens to be smart with their money as they enter into young adulthood is good for them, and good for you.

You May Also Like

Related Resource Center
Soft inquiries won’t impact your credit scores, and hard inquiries can hurt your scores slightly. Here's what you need to know.
Oct 9, 2023
6 min read
woman on mobile phone image
Having a money plan in place before you turn in your resignation can make the transition smoother. Learn ways to prepare your finances before you go.
Sep 4, 2023
5 min read
Young man relaxing in an orange hammock by a misty lake holding a cup of coffee, looking at laptop on his lap.
Take control of your money and personal wellbeing with tips to recognize burnout and restore your physical, financial, and emotional health.
Aug 7, 2023
6 min read
Woman in pink blazer sitting on ground with laptop in lap next to young girl looking at documents
With six in 10 U.S. consumers living paycheck to paycheck, could budgeting, saving, debt management, or side income be the antidote?
Jul 25, 2023
5 min read
Paycheck to Paycheck
Your credit score plays a role in nearly every financial move you make. Having a great credit score can save you hundreds (or thousands) of dollars a year through lower interest rates on your credit card accounts, personal loans, moving loans, car loans, or mortgage.
Jul 9, 2023
4 min read
Man in denim button up holding a phone, sitting at table smiling
Related Impact
From groceries and diapers to Halloween costumes for pets, nearly 60% of American consumers prefer to shop online for everyday items that make life more convenient, comfortable, and enjoyable. And with rising prices showing no signs of stopping anytime soon, we’re pleased to introduce StackitTM from LendingClub Bank—a new browser extension that automatically finds and rewards eligible members with coupons and cash back for extra savings at more than 15,000 favorite online retailers.
Nov 13, 2022
2 min read
blog header stackit 765x430 v1-1
Even in today’s low-yield, high-inflation environment, it’s essential to keep a certain amount of money in an easy-to-access checking or savings account for things like daily household and emergency expenses, or to meet short-term financial goals.
Oct 2, 2022
5 min read
LendingClub Rewards Checking Nationally Certified as Trusted, Afforda
Since 2007, LendingClub has been on a mission to deliver a world-class experience to all our members. This month we took a moment to reflect on the more than four million members who have chosen LendingClub as their partner to help them reach their financial goals.
Apr 19, 2022
2 min read
Illustration of large number 4 and letter M made up of colorful, tiny illustrations of ethnically diverse people
In March 2022, we hosted our first quarterly webinar where we celebrated our one-year anniversary as a digital marketplace bank. 
Mar 6, 2022
less than a minute read
LendingClub completed the acquisition of Radius Bank in February 2021. At that time, in addition to the direct-to-consumer deposit business, we inherited a fintech partner program, and several lending businesses. As we reach the one-year anniversary of the acquisition, and in conjunction with the conclusion of a strategic review of our business operations, we have made the decision to discontinue certain businesses that don’t fit our mission.  
Jan 2, 2022
2 min read
Man in blue button up shirt and glasses smiling
Related FAQ's
We offer several ways for you to make your monthly auto loan payment, so you can choose the method that works best for you. A statement will be mailed to you every month that shows the payment amount and due date.
Nov 29, 2023
less than a minute read
LendingClub provides a year-end statement that summarizes your account activity, including how much interest you’ve earned and information regarding Notes tied to loans that have been charged off.
Jun 7, 2023
less than a minute read
Applying for a lending product is fast, easy, and confidential.
Jun 7, 2023
less than a minute read
Adding creditors to your balance transfer loan is easy.
Jun 7, 2023
3 min read
To qualify for a lending product with LendingClub Bank, you must...
Jun 7, 2023
less than a minute read
Related Glossary
{noun} A type of credit that allows the borrower to make charges and payments against a set borrowing limit, paying interest only on outstanding balances.
Sep 6, 2023
4 min read
{noun} The total annual cost to borrow money, including fees, expressed as a percentage.
Mar 21, 2023
3 min read
{noun} The amount of unpaid interest that has accumulated as of a specific date, either on a loan or an interest-bearing account or investment. 
Mar 21, 2023
4 min read
A debt that is written off as a loss because the financial institution or creditor believes it is no longer collectible due to a substantial period of nonpayment.
Feb 7, 2023
3 min read
{noun} An interest rate that remains the same for a set time, usually for the life of the loan.
Feb 4, 2023
3 min read

LendingClub Bank and its affiliates (collectively, "LendingClub") do not offer legal, financial, or other professional advice. The content on this page is for informational or advertising purposes only and is not a substitute for individualized professional advice. LendingClub is not affiliated with or making any representation as to the company(ies), services, and/or products referenced. LendingClub is not responsible for the content of third-party website(s), and links to those sites should not be viewed as an endorsement. By clicking links to third-party website(s), users are leaving LendingClub’s website. LendingClub does not represent any third party, including any website user, who enters into a transaction as a result of visiting a third-party website. Privacy and security policies of third-party websites may differ from those of the LendingClub website.

Savings are not guaranteed and depend upon various factors, including but not limited to interest rates, fees, and loan term length.

A representative example of payment terms for a Personal Loan is as follows: a borrower receives a loan of $19,584 for a term of 36 months, with an interest rate of 10.29% and a 6.00% origination fee of $1,190 for an APR of 14.60%. In this example, the borrower will receive $18,663 and will make 36 monthly payments of $643. Loan amounts range from $1,000 to $40,000 and loan term lengths range from 24 months to 60 months. Some amounts, rates, and term lengths may be unavailable in certain states.

For Personal Loans, APR ranges from 9.57% to 35.99% and origination fee ranges from 3.00% to 8.00% of the loan amount. APRs and origination fees are determined at the time of application. Lowest APR is available to borrowers with excellent credit. Advertised rates and fees are valid as of July 11, 2024 and are subject to change without notice.

Checking a rate through us generates a soft credit inquiry on a person’s credit report, which is visible only to that person. A hard credit inquiry, which is visible to that person and others, and which may affect that person’s credit score, only appears on the person’s credit report if and when a loan is issued to the person. Credit eligibility is not guaranteed. APR and other credit terms depend upon credit score and other key financing characteristics, including but not limited to the amount financed, loan term length, and credit usage and history.  

Unless otherwise specified, all credit and deposit products are provided by LendingClub Bank, N.A., Member FDIC, Equal Housing Lender (“LendingClub Bank”), a wholly-owned subsidiary of LendingClub Corporation, NMLS ID 167439. Credit products are subject to credit approval and may be subject to sufficient investor commitment. ​Deposit accounts are subject to approval. Only deposit products are FDIC insured.

“LendingClub” and the “LC” symbol are trademarks of LendingClub Bank.

© 2024 LendingClub Bank. All rights reserved.