It is very important to teach your teens to save money early in life. This will help them to be better prepared to handle their finances and achieve independence in the future.
Therefore, it rests increasingly more on parents to begin “teaching” their teenagers to manage their money effectively.
Some of the ways you can use to teach your teens to save money are by opening them a bank account, letting them imbibe saving habits, creating a reward for saving, teaching them how to budget, and so on.
Read on to learn how to teach your teens to save money successfully
Read about modern ways of saving money.
How do I Successfully Teach My Teens To Save Money?
Here are some of the strategies to use and teach your teens to save money successfully.
1. Open A Bank Account For Them
If you want to teach your teens to save money, start by creating a checking account for regular spending and a savings account for long-term goals.
You may open up a teenage checking account that provides you with joint holder status to achieve the ideal combination of independence and supervision.
With this arrangement, you maintain complete control over the account while giving your teen the ability to manage and keep tabs on it online or on mobile.
Then you may issue them a personal debit card linked to the checking account.
Debit cards provide other advantages besides minimizing the need to carry cash and keeping track of where the money is spent. They are just as practical as credit cards and give parents the ability to monitor their teen’s spending.
2. Create A Savings Habit
Parents should teach their teens to save money letting them have good saving habits.
Teenagers should deposit some of their earnings into a separate savings account by paying themselves a percentage of their earnings.
Getting in the habit of saving some percentage, like 15%, will equip them to establish an emergency fund and set money aside for a rainy day.
Encourage your teen to contribute to a noble cause like a charity of their choice to further promote the virtue of generosity.
Show your teen how to set up an automated transfer of money from their paycheck into a separate savings account if their employer supports direct deposit.
You can also think about assisting your teen in setting up an app for automated savings. Numerous trustworthy savings applications are offered for free or for very minimal cost.
Your teen may create savings goals and automatic deposit triggers by linking their accounts, at which point the app can transfer money from their checking account to their savings account.
3. Lead By Example.
If you have established a habit of saving money, talk to your teen about your financial situation and give any details that you feel like sharing so they can see the tangible results of prioritizing savings.
Sharing your savings account balances or your teen’s emergency fund balance, and explaining to them how your strategies have helped you in for staying out of debt are some examples of how you may help them understand the importance of savings.
The aim of encouraging teens to save money more is to help them develop a saving habit that they find rewarding.
You can ensure that your teen will prioritize saving in their own lives by attempting to educate them on the advantages of the saving habit.
4. Make Them Earn Their Own Money.
Teenagers frequently do not grasp the value of saving money when given money freely.
On the other hand, they start to see the significance of saving for the future when they have to work for the money they need for social activities or additional clothes outside of the family’s clothing budget, and other things they need.
Give your teen the option to earn money for spending by completing household tasks, babysitting, or having a part-time job rather than just giving them cash whenever they want it.
Money earned is almost usually appreciated higher than money regularly received as a gift. Valued money is more likely to be prudently managed.
5. Introduce Them To Budgeting
You can offer teenagers the control they need to spend their money in ways that are most essential to their unique goals by teaching them the value of setting up a budget for the money they make and keeping track of their weekly expenditures.
Ask your teen to list their financial responsibilities in writing. Assist them in creating a budget that reflects their income by helping them figure out how much to spend on each item.
Teach them the value of saving money and how to approach it just like any other expense that is coming due. Make sure they initially pay themselves.
Teens are more likely to save when you teach them how to prioritize and plan for both needs and wants by using a budget, so Let them also understand the significance of paying themselves first.
This is because they know that there is money set aside in their budget for fun things, too, which increases their likelihood of saving.
Read more on how to budget your money wisely.
6. Let Them Differentiate Between Need And Want
Your teen will learn to make wise financial decisions if they can differentiate between needs and wants.
Teens may learn to distinguish between needs and wants by having discussions about them. They should know what their need and wants are.
They can also learn to assess their finances and make better financial decisions, such as choosing a more inexpensive phone over a flashy expensive one
Parents should explain financial goal-setting to their children since teens nowadays live in a culture of instant gratification and have both short- and long-term goals and requirements.
7. Give Them A Head Start On Insurance.
Start with auto insurance if you have a teen driver. Explain that insurance is used to pay for large expenses that would be challenging to pay on their own.
Examine the policy and pay close attention to the deductibles; this idea is also helpful when dealing with other types of insurance, such as health, renters, or homeowners insurance.
Consider informing them that if they cause accidents, they will contribute to paying the deductible.
8. Create Rewards For Saving
Teenagers may be inspired to save more if their parents use different forms of reward systems.
Here are some suggestions for savings incentives for your teenager:
- Offering to pay for all or a portion of their education expenses if they can demonstrate a regular practice of setting aside a certain amount of their money
- Giving kids the chance to earn money by performing household tasks, as long as the money gained is immediately saved.
- Providing financial assistance for additional significant costs based on a savings plan you set with your teenager
9. Develop Credit Literacy.
The harm to their credit score affects more than just their capacity to pay for things like car loans, insurance, cheaper rates, and mortgages. Additionally, the amount of interest they pay reduces their ability to save for their future aspirations.
Explain how credit works and how, after interest is taken into account, purchases can become more and more expensive over time.
Sharing a credit card, vehicle loan, or mortgage statement with your kid is advised by Bell to help them understand the fundamentals of having a good credit record.
10. Teach Them About Retirement.
The sooner teenagers realize that retirement savings will be their largest expenditure, the better off they may be. Consider creating a Roth IRA if your adolescent has a job.
It is better they start on time, to enjoy the benefits of compound earnings, individuals will have more money to save the sooner they begin.
Final Thought.
Now that you know how to teach your teens to save money, it is important to know that parents play a crucial role in boosting teens’ financial literacy and putting them in a position to make smart decisions.
So, they should be guided well to prepare them as they move on to college or start living on their own.
Follow these seven suggestions to teach teenagers money management skills that might pay them greatly throughout their lives.
Learn more about savings by reading how to save money in college.