What's the Best Way to Talk Money With Teens?

MARK RIEPE: I'm Mark Riepe. I head up the Schwab Center for Financial Research, and this is Financial Decoder, an original podcast from Charles Schwab. It's a show about financial decision-making and the cognitive and emotional biases that can cloud our judgment.

Here's a question for you. What do you wish your parents had taught you? There's a piece from BuzzFeed that asked this question. One of the replies is a great springboard for today's episode. The answer was, and I quote, "Compound interest, hands down. I mean, I knew it was powerful – but teenage me thought it was some boring adult thing like taxes or owning a shed."[1]

That’s a great quote. Compound interest is important, but what’s more important is overall financial literacy. Being financially literate is an important life skill that affects everyone, and we all can play a role in helping those who are less financially literate acquire the knowledge they need to participate in the modern economy.

In fact, parents traditionally have been the primary purveyor of financial literacy. It wasn’t until  2003 that a state required schools to teach a financial literacy course. That pioneering state was Utah and it required kids take a financial literacy course to graduate from high school.[2] I'm recording this in March of 2026 and as of now, thirty-nine states mandate that all high school students take personal finance courses to graduate.[3]

Still, parents play a vital role, even if kids are learning more about finances in school. In fact, in the UK, a survey was conducted of 1,000 parents with children who were 11 to 16 years old. The parents were asked what they wished their parents had taught them when they were young³. 

The number one answer was they wished their parents had taught them how to save money.[4] They also wished they'd been taught how to organize their finances.³ Now that survey was done with parents whose kids were 11 to 16 years old, but you can and should start younger.

Even preschoolers can understand concepts about money. For example, at age 3 children, on average, realize that money can be exchanged for goods.[5] At age 4, they figure out you need money to pay for stuff.  In other words, at age 3, most kids get that money is a thing and it's being traded for stuff. But at age 4, they realize that it's mandatory. You can't get the stuff unless you come up with the money. 

The point is you can start them early. This matters because it’s a basic life skill. It's the same as teaching kids to take responsibility for their actions or to be polite. It helps them to successfully navigate the world. The reason for that is we all have to deal with money. For the rest of our lives. It's vital that kids learn about it, and the sooner, the better. 

So, why don't we teach our kids about money? According to author Jayne Pearl, who has written a series of books about kids and money, there are two main reasons[6]. One, parents are afraid they're terrible role models. People make mistakes with their money. They feel that if they're not perfect in managing their money, they're not qualified to teach others. 

Pearl also found that many parents feel like they don't know a lot about money and don't have the confidence to teach their kids about it.² But the fact is, you don't need a Ph.D. in finance to teach kids about the basics. You don’t need to teach your kids what you don’t know. Teach them what you do know, no matter how rudimentary. Just going to an ATM with a young child can be a perfect teaching opportunity.

And for teens, which is the age group we're going to be focusing on most today, you can obviously get into more complex topics. Even if you've never talked to your teen yet about money, now's a great time to start. 

I want to mention something here about another reason some of us might be reluctant to teach kids about money, and that is income. Or rather, not enough of it. Some people feel that you don't need to know that much about money unless you have a lot of it. But the opposite is true. The less money you have, the more you need to know about managing it because you can’t afford to make a mistake.

Let's say your kid graduates from high school or college and gets an entry-level job. They're probably not making much money. When you don't have much is when it's especially important to know about budgeting and saving and investing.

And now to my guest, and that's Patrick Means. He’s been on the show a couple of times before and he's here today to give us some great ideas, insights, and strategies about teaching financial literacy. Patrick is a vice president and branch manager here at Schwab. He's been helping clients with financial planning and investing guidance for more than 20 years.

Patrick, welcome back. 

PATRICK MEANS: Hi Mark. Thanks for having me back. Great to be here.

MARK: One of the things I love about this show is getting to talk to advisors who are in the trenches with families every day. And the premise of today's episode is that financial literacy, it's not just a school subject. It's actually foundational to independence. 
So Patrick, in your experience, why is that distinction between just saving money and total financial independence why is that so critical for a teen to really wrap their head around?

PATRICK: Yeah, I believe that distinction between just savings and financial independence is important because it's all encompassing and it's about making right decisions. And the more information that is useful, that is pertinent to my situation, the better I can set myself up for success. And so that's why I'm so passionate about the topic, I know Schwab is so passionate about the topic, because we know that when individuals and young people who are extremely smart, extremely adaptable, are given the resources, it can create a huge opportunity for them to have a bright future, which is what I want and what many people want for their young people.

MARK: Something that really struck me from the research, Patrick, is that teens absorb so much more from watching us, or from watching adults or their parents, than from listening to a lecture. We might think we're teaching them, but they're actually really watching our money body language to a certain extent. So, how can a parent audit their own habits to make sure they're modeling the right behavior?

PATRICK: Great question. I think one of the ways you model behavior is you talk about it. So, talking about money when they reach a certain milestone, I think helps bridge the conversation. Specifically, if you're saying, congrats on your first job, or let's talk about saving for this new car. I think those moments are great ways to engage, get buy-in, and have a conversation. 

I think another way to model behavior is to make it hands-on. Do it collaboratively. Think about opening account together so you can demystify what this whole investing concept is about. And I think the other way to model behavior is just to involve your teens in money-making decisions. I heard this once from someone I really respect how he took his family on vacation and he said, hey, this is what we're gonna spend. And he gave the decision-making to his teenage children around how they should allocate the funds for the activities. 

What he told me he learned was one, they took ownership and came up with really great ideas that he wouldn't have thought of himself to do, but it taught them a very important lesson around staying within a framework or a plan and how to prioritize what they really wanted to do. And so he, to me, was modeling the behavior of what he ultimately was hoping that his children would do, and that is right, to be thoughtful around how we spend money. 

MARK: I think a lot of parents feel they have to be 'perfect' before they talk to their kids about money. But you're a big advocate for normalizing these talks at home. Is it actually more helpful for a parent to be open about their own financial wins and who knows, maybe more importantly, the mistakes they've made?

PATRICK: Yeah, I think the benefit of being able to share about the things that you've done well and things you would want to do better is a great starting point because it makes it more practical and relatable to your teenager. And I think that just creates more buy-in when we're able to do that. 

We don't have to be perfect. We don't have to know it all. But sometimes parents look back and say, I wish I could have done this differently. And sharing that with your son or daughter, hey, this is something that if I were your age, I would have liked to have done. And here's the outcomes that would have helped me, right? Shows that vulnerability, but also says, okay, well, if mom and dad are saying this, and this is important, that is something that they'll listen to. 

And yes, it's hard to share with your child, right, that there are things that you'd wish you'd done differently. But I think when they hear that, that endears them to you and that sticks with them. And I think it's much more beneficial than simply a chart or writing it down or even some exercise we could do with them. 

MARK: How do you help a teen move past the lifestyle content that they're seeing online and connect money in a way that really matters to them, like for example saving for their first car or a summer trip?

PATRICK: Here's what I would say first, you know, social media in itself isn't a bad thing. I think for lot of teens, and I'm envious, the access to information that they have is really great because on their own, they can research it. They don't have to go to an encyclopedia or a library. They have instant access to learn. That's a great thing. 

The challenge is, right, how do I discern between what's relative and best for me versus what I'm just reading here is for the masses? And that's hard for sometimes adults to be able to discern that. So I think the best practice is, all right, if I hear something, it may sound cool, may sound great. But maybe I want to pause, right, the 24 hour rule and say, should I ask somebody if this really is relative to me? Is this the best next step? Does this apply to me? And sometimes just taking that 24 hours and asking that additional question allows you to look back on that information and make a better decision. 

And so that will often be the way to not make a rash decision off information, although good may not be best for you, is to pause, wait to 24 hours, ask someone who you trust, and I can make a better and more informed decision moving forward. 

MARK: Next up, Patrick, I'd like to ask you some questions about methods parents can use to give their teens some real-world practice. For starters, what exactly is a custodial brokerage account? How does it actually work in terms of ownership? And I guess the most important question, how might it differ from a joint account like a Schwab Teen Investor Account?

PATRICK: Mark, that's a great question. So I'll start with explaining the differences of a custodial versus a joint account by going with the custodial account first. A custodial account is an account opened by an adult for the benefit of a minor. So the adult controls the funding, investing, and distributing of such funds in that account. At the age of majority, which can vary from state to state, typically between the ages of 18 to 21, that minor then has access and control of that account.

So the major difference between that and the joint account, like a Schwab Teen Investment Account, is the teenager has control starting at the age of 13. And these teen accounts, teenagers between the ages of 13 to 17, along with their parents, will open an investment account where they can invest in securities like stocks and bonds and exchange traded fund, mutual fund, even fractional shares. But now they have ownership to do that themselves.

In addition, they can also move money in and out of the account, things that they cannot do in the custodial account because they don't have control or ownership. 

MARK: And when it comes to choosing between these types of accounts, how do parents weigh them against their needs and priorities?

PATRICK: So I think the answer to how do I distinguish between what is right or best is around the answer of control. So if your goal is to have your teen have more control early on as a teenager to be involved in the process, then the joint account like the Schwab Teen Investor account is probably going to be an option you want to consider. 

If not having that control is not important to you or you want to maintain that, then a custodial account would be the alternative option you want to consider. But know both accounts are great around being able to engage with your teenager to talk about the investment choices, the goals of the account and being able have that investing concept conversation together. 

MARK: Here’s what I think is a good idea that’s pretty easy to implement.  Many people don't realize a teen can have a Roth IRA. How does that work for a minor with a part-time job, and what are the rules around 'earned income' that parents need to know?

PATRICK: Mark, you're right. It is a account that probably is underutilized. So what you're referring to is a custodial Roth IRA where potentially a parent who has a teenager who's earning income, they could deposit those earnings into this custodial account, or Roth IRA. 

And the benefit of that is there's tax deferral and eventually when the minor becomes the owner of the account, there also is the potential to have tax-free withdrawals that they'll use for themselves in retirement. 

And so if you add in those tax benefits plus the fact that they're younger and you get the compounding interest over time, I think it's a great vehicle for parents to consider a custodial Roth IRA as an opportunity for their children who do have earned income as teenagers. 

MARK: It turns out that many teens are curious about the market but they're paralyzed by the fear of losing money. How do things like mock trading or simulators act as a 'safe space' or a sandbox for them to build some confidence before they’re actually investing real money?

PATRICK: So I have an experience I want to share. It's actually highlighting a partnership that Charles Schwab has with SIFMA Foundation around a stock game that they do. And it speaks to exactly what you're mentioning. And essentially, what the teenagers are able to do is they have access to a $100,000 virtual portfolio where they can simulate the stock market, global market, and make investment decisions.

But here's why I think it's really beneficial for teenagers. Three things that come to mind. The engagement, when they're able to do it, is amazing, right? They really get into it, they understand it, they internalize it, and it keeps them actively wanting to learn more. 

Second, it forces them to do research, to understand financial terms and ideas and concepts, which are only going to further their knowledge and help them when they're making decisions for themselves, when they invest, whether they get into finance as a career or not. 

But third, and probably most important is, they get to see the gains or losses of their investment portfolio. And believe me, when they see those losses, right, what they're internalizing and probably for the first time having a firsthand experience in is how do I manage risk? Because here's this money and I saw it go down in value and here's your way to try to minimize the downside while still being able to get gains on this money. 

And so it's teaching a very important concept investing, right? Managing risk at a young age and that's something that they'll take with them going forward. So a big proponent of virtual investing is simply because it teaches those skills that gives them more confidence when they're ready to do it with their own money. 

MARK: Over recent years we've been seeing fewer and fewer barriers to entry for investing. I'm curious how something like fractional shares opens up options for teens getting started when they might only have let's say twenty or thirty dollars to get started with?

PATRICK: Yes, so Mark, think fractional shares are a great way to introduce a teen to investing and remove barriers for them. Because in the past, let's say there's a company that they're really into, they know a ton about, they buy products, but the share price is $1,000. And they go to buy it and that can be discouraging because they can't afford it.

So what the fractional share allows them to do is now own a portion of that. So instead of having to spend $1,000 in our scenario, maybe it's just $100. Or rather than $100 in that particular company with the share price of 100, it's at 20. And so I own 20 % of it. 

And now I can use additional $20 or additional $40 to buy into shares of other companies that they're fans of. So you think about not only making it accessible, but more engaging. It's the opportunity to understand what they like and get invested to become owners of them.

MARK: We often hear about the 50-30-20 rule for adults or other personal finance rules of thumb.  I'm wondering how doable frameworks like those are for a 16-year-old. How can a parent introduce a structure like that without it feeling like homework?

PATRICK:  50-30-20 to a teenager, sounds a bit daunting. What I do know works really well, having these conversations with teenagers and feedback they share with me, is tracking their spending. So there's quite a number of apps out there that could track what they spend weekly. So parents, if you have them engage in that, a great way to have a conversation around their spending plan is to have them understand what they spent money on and what changes, if any, would they make with that information. 

The other thing that I think resonates really well with teens that, parents, we can do, is if your teenager is working and they're earning a paycheck, have them set up a systematic savings into a savings account.

In that way, they're putting some money aside for themselves. So really, they're encompassing the 50-30-20 rule, but it's in much more relatable ways and exercises that they can understand. And then I'll also add probably their favorite is add an incentive to it. So if they do save, consider making a match or giving them a bonus if they get to a certain milestone. Matching a dollar, well, and every $10 saved is a great motivating factor for teenagers. 

MARK: What are some of those financial skills that a teen can't get from a textbook, and really can only pick up once they have that first job and a real paycheck in their hand?

PATRICK: So when they get that first paycheck, it's probably the most money they've ever made. And so you want to have the conversation that's not necessarily an invitation just to go spend more, right? But let's think about what we can do with these funds both today and in the future. 

So I would encourage parents, you know, three things to think about. Do they have a checking or savings account? If they haven't, right, let's go ahead and open that so we can directly deposit money into there and then potentially set some aside for savings. Second, do we want to have a debit card linked to the account, again, so they're able to track their spending? And then lastly, do they have a goal in mind that they want to save for their income? And so I think that's a very valuable conversation. And again, you have to be in the moment to understand that. 

I think the second thing that will be a very important conversation is understanding Uncle Sam and his role in your paycheck. I'm sure at least I was the first paycheck they get, they might be disappointed to see that they didn't keep all of what they made. So it's again great teaching moment to understand how that works. But even more importantly, do I fill out a withholding form and what should I do even though they're not able to make claims of dependence? You're teaching them to how to understand a withholding form and a W-4 so that when they again become adults, they are more knowledgeable about that process. 

MARK: If a parent is feeling totally overwhelmed by the apps, the accounts, and the technology, and they only have time to prioritize one habit or key principle for their teen, what do you think it should be?

PATRICK: So let me start by answering that question and say, parents, here's the good news. 90% of teens actually want you to be involved in talking to them about these topics. So I think sometimes we get in our heads that we're not cool and that they don't want us to be involved. No, they do. And then surveys also tell us that 90% of parents want to be involved in these conversations. And so I think that's really important to know to kind of set the framework that we're aligned on how important this is in this dialogue. 

But I would just encourage parents to say, don't overcomplicate it. Make it such that it's approachable and relatable. I always try to, you know, minimize the financial jargon I might use when talking to other teens or even my son. But I think you don't have to go at it alone is the other message that I would send. And there's a lot of great resources that are out there. Maybe look for a video tutorial that could be something you do together to get you going. Maybe find an article or something on social media that has that conversation that could get the conversation to be more engaging. 

I'm a big fan of Schwab MoneyWise, which has some unique content just for teens. And I know that we also have some online tutorials that we've made available. And if a teen goes through that, Schwab will actually give them $50 towards opening up their new Schwab Teen Investor account. 

But the last thing I would say is it's okay to also phone a friend. So if you have other mentors in that individual's life or even a professional, know that they could be another resource to just help you in the conversation and reinforce some of the important topics that you think you want them to know. 

MARK: What’s interesting about those numbers is that parents and teens are clearly aligned on what they want to talk about, but it’s still a struggle to actually have the conversation. A lot of that seems to come down to how uncomfortable it can feel for adults to be open about money. How can a parent work through that discomfort so it doesn’t get in the way of their teen’s financial education?

PATRICK: That's a great question and something that personally I've had to think through myself and obviously have experience in my career as we're talking to clients who trying to navigate this conversation too. And often what I find is that what makes it difficult is we make the conversation about "me." You know, it's, well, I don't want to share with my children what I have, or I don't want to share with them what I don't have? 

And so when we make it about that, it goes away from really it's just about educating them on what is beneficial information so they can make good decisions. Whether we made the best ones or not is not as important. I think it helps in being vulnerable, but it shouldn't be that I've had to done everything the right way, perfect every time, in order to feel that I can't still impart something that's knowledgeable. 

I don't have to get into the details of what I might be thinking for my kids, but I just want to be able to share with them these important money concepts, important investing concepts. I bring in real-time examples. I talk to them as I engage as we do day-to-day things and bring them in on decision-making around our finances. Those are the things that I think make that impact and take it away from us to them.

MARK: Before we close, I want to step back and connect a few dots. One theme that keeps coming up in conversations about financial literacy is that interest in investing is showing up earlier than it used to. And not just among adults, but among teenagers.

Schwab research shows that a majority of teens say they’re interested in investing, and parents largely agree that learning how investing works is important. When parents were asked why, the answers tend to cluster around a few ideas: Teaching responsibility, giving kids a head start, and helping them understand how money grows over time.

Another interesting fact that we’ve learned is that teens themselves don’t seem to be approaching investing as a quick‑win activity. Most say they prefer investments that grow gradually rather than ones that move fast and unpredictably. That suggests a mindset that’s more patient than people often assume.

 Another data point Patrick emphasized is that teens overwhelmingly want their parents involved, at least to some degree. The good news is that parents want that involvement as well. And that tells me that this isn’t about independence versus control. It’s about guided learning.

Which brings us back to another one of Patrick's points: Financial literacy isn’t just about information. It’s about experience, paired with context. Learning happens when people are allowed to engage, make decisions, and then talk through the results with someone who has more perspective.

That idea is behind a new offering Schwab recently introduced called the Schwab Teen Investor Account. It’s a joint brokerage account for teens ages 13 to 17 and a parent or legal guardian. The structure is intentional. Teens can invest and learn how markets work, while parents can stay involved and provide guardrails. 

The goal isn’t sophistication. It’s familiarity. Understanding what investing actually feels like before the consequences get larger. There’s also an educational component tied to the account. Teens have access to investing and personal finance education designed for where they are, and there’s an online course that reinforces the basics. 

Completing that course within a set time frame comes with a small financial incentive, which links learning to action. Whether or not you ever use a specific account, the broader takeaway is this. Starting earlier gives people time. Time to make small mistakes. Time to ask questions. Time to build habits before money decisions carry more weight. And time is the one advantage that young investors have in abundance.

If you want to learn more about the Schwab Teen Investor account, you can find information at schwab.com/teen-account. That’s www.schwab.com/teen-account. 

Schwab has an incredible program called Moneywise. If you look on the website – and we'll link to it in the show notes – there's a section called "Schwab Moneywise Teens" that delves into goals, jobs, college, credit and debt, and other topics that come up in the teenage years.

Thanks for listening to our show on this important topic. If you'd like to hear more from me, you can follow me on my LinkedIn page or at X @MarkRiepe. That's M-A-R-K-R-I-E-P-E.

As always, we'd appreciate it if you'd give us a rating or review on Apple Podcasts. Or comment on the show if you listen to it on Spotify. Or tell a friend about us. We always like new listeners, so if you know someone who might like the show, please tell them about it. They can follow us for free in their favorite podcasting app.

For important disclosures, see the show notes and schwab.com/FinancialDecoder. 

[1]From "It's Okay To Be Alone": Here are 17 Lifelong Regrets Older Adults Carry With Them To This Day," BuzzFeed, posted on December 23, 2024, https://www.buzzfeed.com/carleysuthers/older-adults-share-valuable-life-lessons

[2] "Which States Require Financial Literacy for High School Students?" Ramsey Solutions, April 5, 2025,  Which States Require Financial Literacy for High School Stud - Ramsey

[3] "Council for Economic Education Reports that More States Require a Personal Finance Course to Graduate from High School, Empowering Students to Manage Money," Financial Content, published March 18, 2026, Council for Economic Education Reports that More States Require a Personal Finance Course to Graduate from High School, Empowering Students to Manage Money | FinancialContent

[4] Steve Richmond, "Survey reveals the life skills parents wish they'd been taught at school," Independent, independent.co.uk, April 12, 2021, https://www.independent.co.uk/news/education/parents-schools-life-skills-survey-b1830010.html

[5] Schwabmoneywise.com/public/moneywise/teaching_kids 

[6] Kelly Wallace, "Why don't parents talk to their kids about money?" CNN, September 20, 2017, https://www.cnn.com/2017/09/13/health/money-talking-to-kids-parenting