It takes time to grow your savings, and money management is something most teenagers take years to get the hang of. Sadly, even some grown-ups have yet to master it. Many adults live paycheck to paycheck without saving enough for emergencies, setting a poor example for teenagers.
Today's teens will become the adults of tomorrow. Teaching them the value of saving money early on gives them a head start in life. Here are several ways to teach teenagers about developing healthy money habits.
Discuss Wants Over Needs
Teenagers should learn to differentiate between wants and needs. Explain to them that wants are the things we fancy, like the latest iPhone or Louis Vuitton bag. Tell them that needs are the necessities of life, such as food, shelter, essential clothing, education, and healthcare. Use your budget to illustrate how needs must come ahead of wants when it comes to spending.
About 70% of Generation Z admits they do not know how to set a budget. And one of the effective ways to teach saving tips to teenagers is to give them insight into the family's budget. If you have heard of the 50/30/20 rule, this is a stepping stone to teaching adolescents how to establish a workable budget. 50% goes to basic needs, 30% is allocated for personal spending, and 20% is for savings – this is an easy budgeting guideline that can be followed at any age.
Set Some Goals for Saving
Telling your teens to save without explaining why is pointless. Helping them define a savings goal can be a much better way to get them inspired. If they know what they want to save for, help them split their goals into smaller ones. For example, if they purchase a video game console and receive a $20 allowance a week, tell them how long it will take to reach that goal when they save a portion from that weekly allowance.
As a parent, ensure your teen is equipped to make sound financial choices. The sooner you teaching them to save money the better. Your teen may not realize the value of this now, but they'll thank you when they are older. Eventually, they will apply these lessons to afford large purchases, like buying a car. Those parents who just give money away to their teens are making a big mistake.
Have Them Open a Savings Account
As soon as your teens have a savings goal in mind, this is an opportunity for them to store their money. One place to start is to have them open a savings account at a bank. This way, they'll be able to see how much their savings are piling up. This will also show how much growth they are making toward their goal.
Getting used to setting aside at least 10% of their money in a savings account will also lead them to eventually create an emergency fund. With that, they will ultimately be able to save to construct their first home or set money aside for a rainy day. You may also consider setting up an automatic saving app. By linking their account, your teen child will have his savings automatically deposited into his account.
Keep a Record of Spending and Saving
A sensible saving tip for teenagers is maintaining a record of spending and saving. Get 12 envelopes, mark them with the year's corresponding month, and ask your teen to save each month's receipt (from his purchases) in the relevant envelope. Doing so will allow him to review procurements, evaluate past buying impulses and analyze when they should have spent money wisely. It will help improve their spending habits in the long run.
Teaching your kids that spending is not always buying things you want is essential. They must learn that they'll have to spend money on things they need when they become adults. Make them realize that there will always be a backlash for each choice. Personal finance is about decisions; this is another saving tip for teenagers.
Lead by Example
The best way to teach your teens about saving money is for you to save money as well. When you are out in the mall or grocery shopping, show them how to distinguish and compare different prices and explain why buying one item makes better sense than another. You should also have a good record of spending and saving regularly. Reinforce to them that every time you get paid, you save a part of your paycheck for the future. They'll soon follow suit.
If you want your teens to develop good spending and saving practices, they need to see you making smart spending and saving choices. Practice what you preach and preach with consistency. If you put in the effort and convey a clear message regarding money, you will instill good habits that will serve your teens well.
Sow a Retirement Seed
During teenage years, it may not be a top priority yet but have them understand how saving regularly can significantly influence their life for their future. A saving tip for teenagers is that the earlier they acknowledge that retirement is the most significant change they have to save for, the better off they will become. The earlier they start saving, the more money they will have in the future. This move might be the secret to making your teen into a financially confident individual.
Have your teen master the mindset of saving for short-term goals into long-term goals. Introduce them to the magic of compound interest. Compound interest can bring about huge returns, and the earlier you launch your teen into it, the bigger boost they'll have in prepping for retirement.
Giving helpful saving tips for teenagers takes time on your part, and it won't be that easy. However, if you want your teens to know how to manage their finances properly, then it's worth it. Taking the opportunity to teach them now will be worth it. There is no required age to start practicing good money habits. The earlier they are exposed to it, the sooner they will become financially savvy.
Remember, there will always be mistakes along their path to becoming financially responsible. Just make sure your teens understand the importance of money to their future, and as long as they form good habits over time, they'll be better off in the long run. You will be able to instill the roadmap of lifelong financial success in your children.