As teenagers transition into adulthood, understanding money becomes increasingly important. Some children may take a financial literacy course in school, but it’s not a required course in every district … yet.

Pennsylvania recently became the 25th state to require financial literacy classes for all high school graduates starting with the class of 2027, but the curriculum isn’t in place at all schools today. This makes it so important that parents talk to their kids about personal finance before they’re thrust into the real world. Here are 10 essential money lessons every teen should learn:

1. The Importance of Saving and the Concept of Interest

Your teen has big goals for the future — their first car or college, perhaps. Emphasize the benefits of saving in order to reach those goals and having an emergency fund for unexpected expenses. Encourage teens to save a portion of their earnings or allowance regularly. Teens may get excited about saving when they learn that putting money in a savings account can lead to additional earnings over time in the form of interest. Be sure they know to look around for the best savings account interest rates so they can reach their savings goals faster.

2. The Basics of Budgeting

It’s important for teens to understand that creating a budget and sticking to it is essential for their financial wellbeing. Using budgeting apps, like the tools in Citadel’s Online & Mobile Banking, or simple spreadsheets can help them track their expenses, set financial goals, and avoid overspending.

3. How to Read a Paycheck

Understanding a paycheck is essential when entering the workforce. Teens should learn about gross vs. net income and deductions such as taxes and Social Security. This knowledge will help them understand what they are actually earning and how to plan their budgets accordingly.

4. Spend Smart

Teaching teens to prioritize essential expenses (like groceries and utilities) over discretionary items (like the latest gadgets) will help them manage their finances responsibly and avoid unnecessary debt. Encourage them to research products, compare prices, and look for deals before making purchases.

5. The Importance of Their Credit Score

Credit scores are crucial for many aspects of financial life, from getting a loan to renting an apartment. Teens should learn how credit works, including how to build a positive credit history. Understanding how late payments and high balances can negatively affect credit scores can help them stay on the right track. Once they turn 18, they should regularly check their credit report to ensure its accuracy and report any potential issues early.

6. Understanding the Cost of Borrowing

Teach your child about borrowing and the associated costs, such as interest on loans and credit cards. Explain that borrowing money often means paying back more than you borrowed. Make sure they understand that, just like with savings accounts, it’s important to shop around to make sure they’re getting the best rate and that their credit score will impact the rate they qualify for.

7. Avoid Going Too Far into Debt

It’s critical that teens learn early not to accumulate an excessive amount of debt. When taking on debt, they should be sure to consider the pros and the cons of that debt and how long it will take to pay it back. While taking on debts like student loans or a mortgage can be beneficial in the long run, it’s important they limit bad debt, like high-interest credit card debt. High-interest rate credit card debt can be financially damaging and create stress. It can also reduce their ability to take out other loans. It’s important they know to use credit cards responsibly.

8. The Role of Insurance

Teens should be aware of various types of insurance they may need over time, such as health, auto, and renters insurance. Understanding how insurance works and its importance in protecting against financial loss is key. Discussing these concepts can help them safeguard their assets and prepare them for the potential costs associated with different types of coverage.

9. The Basics of Investing

While it may seem early, introducing teens to the basic concepts of investing can be beneficial. Teach them about different types of investments (stocks, bonds, mutual funds) and the importance of starting early. Even small investments can grow significantly over time.

10. The Impact of Financial Decisions on Future Goals

Help teens understand how their current financial decisions can impact their long-term goals. Discuss the importance of planning for financial milestones like buying a home and retirement. Making informed decisions now can have significant effects on their future financial stability and opportunities.

Bank Accounts for Kids and Teens

If your little ones are ready to start practicing healthy savings habits even before the teen years, they’ll be automatically enrolled in Citadel’s Kids Club account when they become a Citadel member. With no monthly fees and the opportunity to earn interest as their savings grow, the Kids Club is a great place for them to get started. As an extra incentive, Kids Club members receive a birthday card every year for $10 to be redeemed and deposited at any Citadel branch.

When your child is ready for a more flexible account, and possibly a debit card of their own, Citadel provides Teen Debit Accounts starting at age 13. They can use direct deposit for their paychecks and send and receive cash when connected to apps like Venmo, PayPal, or Zelle.