Despite an abundance of technology at their fingertips, American teens prefer to get paid in cash. This according to a new survey by Junior Achievement USA and Alliance Data. The study polled 1,000 teens between the ages of 13 and 18 in July 2019. Of those, 75% have made cash purchases and 80% of those who receive money (from parents or caregivers) get it in the form of cash.
“Very few adults, let alone teens, have the discipline to actually track where cash is being spent,” says money mentor Miata Edoga tells Parentology. “When we just hand our kids a cash allowance, we’re neither teaching them to monitor their spending choices, nor preparing them for using credit or performing online transactions when they’re adults.”

Giving cash to kids is a missed opportunity, Nathan Grant, Credit Industry Analyst with Credit Card Insider, tells Parentology. His recommendation, “Try to set your children up with an opportunity to establish good credit and teach them how to use money responsibly.”
Grant says getting teens into the habit of using a credit card (with a limit) can establish good credit and a healthy relationship with money. Since no parent wants their child to leap into the world of credit uninformed and unprepared, Grant suggests two options to ease your teen into those uncharted waters.
Authorized users

Adding your teen to your existing credit card account as an authorized user can teach them some good money habits.
“This allows them to start building a credit history before they are of legal age to get their own credit cards,” Grant says. “Keep in mind each card issuer has its own minimum age requirement for authorized users, and they vary quite a bit. Some have no requirements at all. And some issuers set a limit on the number of AUs [authorized users] you can have on a single account.”
It’s important to note that your credit history should be in good standing if you go this route, so make sure you’ve made peace with your money demons before giving your teen a bird’s eye view of your spending habits.

Prepaid Debit Cards
Signing up for a prepaid debit card is a good way to teach your teen about budgeting without cash. “Many prepaid cards allow for monthly direct deposits, so you could load their allowance, or some other amount, directly onto the card,” says Grant. “This will teach them how to use a card responsibly, which can later be translated into responsible credit card habits.”
Another wise investment for all that loose cash is investing it in a savings plan that can be used for higher education.
A 529 allows parents to invest in diversified, low-cost stocks and bonds, and then withdraw the money tax-free for their child’s education. Because you (the parent) are the account holder, the savings in a 529 technically belongs to you, until you transfer the beneficiary to your teen when they’re ready to go to college.
The great thing about a 529 plan is the ability to invest as much as you want, as often as you want, making it perfect for regular allowance or cash gift contributions. Parentology reported back in October about different kinds of college savings plans available to parents and kids. Read here for more information.
Regardless of the option you choose, as the parent, you need to play an active role in your teen’s financial decisions. A recent CNBC survey revealed that more than a third of teens asked said their financial role model was their parent.
Indeed, learning opportunities abound. “Reviewing bank and credit statements with your kids can be a great opportunity to teach financial responsibility at a young age,” says Grant. “And with an early start, your kids will be better positioned for long-term budgeting success.”