Teenagers don’t usually get their first jobs because they want to save money for the future. They want cash to buy a new car, purchase new clothes and music, or pay for going out with friends. However, getting teenagers in the habit of saving their money from day one is the best way to help them establish strong financial responsibility for the future.
Here are five tips that can help get your teen into the habit of saving money.
- Set a Savings Amount – Before your son or daughter gets a job, be sure to have an agreement on savings. Require that a percentage of the earnings go immediately into a savings account. Let your teen keep the rest for spending. A good division is to split the money 50/50.
- Setup an Online Savings Account – When you help your teen set up a bank account, be sure to establish two accounts: one for saving and one for spending. Although you can give your child a debit or ATM card for the spending account, you should not for the savings account. You want to make sure your teen cannot access those funds without giving it careful consideration. An online savings account handles this nicely.
- Encourage Savings Goals – When teens start saving, it can be hard to appreciate the benefits. He or she just knows part of their hard earned money is going into the bank and can’t be enjoyed. Have your son or daughter set a goal for savings, such as to buy a big ticket item or to put a down payment on a car. The moment he or she can use the savings for the purchase the realization of the benefits of saving can be amazing.
- Put Savings in High Yield Accounts – Another way to convince teens that saving is good is to use high yield accounts. When he or she sees that their money can be earning money, they will be more likely to enjoy stashing a portion of it away. Again, look online.
- Help Teens Start Investing – Having a savings is good but if you want to provide your son or daughter with valuable future skills encourage them to invest part of their savings. Let them choose their own investments and consider giving them a book or two on the basics of investing. Encourage them to follow the market and to track their earnings and losses. Giving your teen an appreciation and understanding of investing now will help them be more financially prepared for the future.
{ 3 comments… read them below or add one }
I think #3 is the only good advice here.
The only thing you can do with a teen is encourage.
If you start saying “Ok you have to save 50% of this money”, then you are sending the wrong message. It’s HIS money, he can do whatever the *&^% he wants with it.
However, encouraging him is definitely a must. If you have a nice lifestyle, explain to your child that the way to achieve success is through wise savings and investments. “Now” is not always as good as “Tomorrow”.
It has to be his own choice, or the lesson won’t be learned.
@Mr Cool Ice – no doubt – trying to figure out what is going on in a teenager’s mind is difficult enough and sometimes the reverse psych is the best method. Also, encouragement needs to be supported by the parents taking their own advice!
Along with saving and investing, I would suggest that parents encourage their teenagers through actions. Work to expand your means, not live below your means. In other words, parents should set an example of acquiring assets that pay them positive cashflow which will then allow them to buy their “toy”. If teenagers grasp onto that concept, they will be far better off down the road. It is great to enjoy cars, clothes, whatever materialistic thing you like, but it is how you pay for it that really matters.