A teenager's first account
The goal is not to prevent mistakes. It is to arrange for the mistakes to be small.
Somewhere around the first job, a young person needs a place for money to land. The instinct of most parents is to build something tightly controlled, and the instinct is half right: the account should be structured so nothing expensive can happen, and then largely left alone.
What to set up
A joint account with a parent or guardian. Required until eighteen anyway, and it means you can see what is happening without asking about it constantly.
Decline, not overdraft. A declined card teaches the lesson for free. An overdraft fee teaches the same lesson for the price of a shift at work.
No credit line attached. Not yet. There is time.
Alerts on their phone, not just yours. Seeing the balance move after every purchase is the thing that builds the instinct. It does more than any conversation will.
A separate savings account with a name on it. "Car," usually. Money labeled with a purpose gets spent differently, at every age.
What to let them get wrong
Spending a paycheck in four days. Buying something they regret. Discovering that a subscription they forgot about has been charging them monthly since March. These are ninety-dollar lessons at sixteen and they are nine-thousand-dollar lessons at twenty-six. The cheap version is the good one.
The temptation is to step in before the mistake completes. Resist it when the amount is survivable, and step in immediately when it is not — a scam, a request for their login, anything involving someone they met online.
One conversation worth having
Show them a real loan. Yours, if you are comfortable — the rate, the term, and what the total cost adds up to. Most adults have never seen those three numbers side by side, which is why so many of them sign for seventy-two months without flinching.
A sixteen-year-old who understands that a longer term means a smaller payment and a larger total is ahead of a large share of the adult population, and it takes about ten minutes.