Teaching Teens How to Save Money
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Every teen looks forward to that first paycheck — but few know what to do with their newfound financial freedom.

Spending and saving habits start early in life, so it’s never too early to start teaching teens the importance of saving money. Here are five practical lessons that will show your teen the value of responsible money management

1. Develop a Savings Habit

Helping teens cultivate a habit of saving is what it’s all about. Encourage your teen to pay him or herself first by putting a certain percentage of the money he or she earns into a separate savings account. Getting used to setting aside 10 percent early will prepare them to save for an emergency fund, for their first home, or a rainy day. You can also teach the value of philanthropy by having the teen save a certain percentage to give to an organization of his or her choice. If your teen’s employer offers direct deposit, show him or her how to set up an automatic transfer of funds from every paycheck into a separate savings. If your teen needs encouragement, you could offer to add one or two percent to the total amount he or she saves over a set period of time.

2. Take It Online

There are a wide variety of online tools that can help you teach your teens how to manage their money. For example, the President's Advisory Council on Financial Capability launched moneyasyougrow.org to help prepare children “to live financially smart lives.” It offers activities and resources that make it easier to talk to kids and teens about spending wisely and saving money as they grow. Similarly, the Financial Industry Regulatory Authority’s saveandinvest.org offers videos and games designed to teach teens and adults about topics like budgeting, saving, and the power of compounding interest.

3. Differentiate Between Needs, Wants, and Wishes

The ability to distinguish between needs and wants will help your teen become a smart spender. Today’s teens live in a world of immediacy, so parents are encouraged to explain financial goal setting, which includes wishes, wants and current and future needs. Having conversations about needs and wants with teens not only helps them differentiate between the two but also teaches them to evaluate and make better financial decisions — such as opting for a lightly used sedan over a shiny new sports car.

4. Establish a Financial Game Plan Together

When it’s time for your teen to decide how to spend his or her money, start by asking him or her to set specific financial goals. Whether they want a bike, a first car or to pre-empt those college expenses, having a clear goal will give your teen a better understanding of how much he or she needs to save. Regions Save Towards a Goal calculator can help teens see the results of saving. Then you can work together to set a weekly or monthly saving goal that will help your teen reach that goal.

5. Keep a Record of Spending and Saving

Set up a simple system to help your teen track spending: Mark 12 envelopes to correspond with each month of the year. Then ask your teen to save each month’s receipts in the appropriate envelope. This will allow him or her to review purchases, evaluate past buying decisions, and recognize when he or she could have spent more wisely — or perhaps not at all. This exercise will empower your teen to improve spending habits over time. Perhaps he or she will think twice about spending money to eat out, for example, and put that money into savings instead.

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This information is general in nature and is provided for educational purposes only. Regions makes no representations as to the accuracy, completeness, timeliness, suitability, or validity of any information presented. Information provided should not be relied on or interpreted as accounting, financial planning, investment, legal, or tax advice. Regions encourages you to consult a professional for advice applicable to your specific situation.