SHORT ANSWER: Teaching teens how to save money can help them build lifelong habits that build financial stability and wealth. They just need these healthy money habits now.
One of the best skills you can teach your child is how to budget and save money. Teens used to learn these skills in high school. But today, they’ll only learn them if their parents teach them. Prepare your kids for a life of healthy financial habits by teaching them how to save money as a teenager to begin building their wealth today.
How to Save Money as a Teenager
Saving money is a skill, and to develop the skill, teenagers need practice. Helping teens learn how to save money now will help them be more financially successful throughout their lives. Sit down with them regularly and train them in these ways to save money.
1. Set Up a Credit Card for Teens
Credit card debt is a growing problem for most Americans. They don’t know how to handle expenses when they have a line of credit available to them so that they can have whatever they want now.
Training teens to use a credit card responsibly from the start will help them build healthy money habits. Set limits based on your child’s available funds and regularly review spending with your child. Show them how they can check in on the card using an app to keep themselves honest about their spending and habits. Also, instruct them to check regularly that all charges are valid to help them spot fraud early and protect their finances.
Best Credit Cards for Teens
2. Open a Bank Account in Their Name
Watching savings grow can motivate your child, and giving them a secure place to put those funds will help them feel good about saving.
Opening a savings account in their name will also help them build their credit history so they can increase their credit score in early adulthood to enjoy the ability to get good loan rates and have options when it’s time to buy a car or house. Getting them one of the best checking accounts for teens could help them start using a debit card and understand how their expenses stack up.
Once they have a nice amount in savings, consider teaching them about investing for teens. Help them grow the money with slow and controlled investments.
3. Set a Saving Goal
Goals help give people purpose and discipline them to stick with their habits. Ask your child what they would like to save for. Make it realistic and then create a plan for how they’ll get there. For example, your teen might want a smartphone by year’s end and a car by the time they graduate high school.
Discipline them to set aside funds for the short-term savings goal alongside the long-term one. Set a deadline for when they’ll have enough saved to purchase the items to keep them focused and motivated.
Meet regularly to talk about progress toward goals and show them how they are doing. This will help keep their eye on their goals.
4. Use the 50/30/20 Rule
Depending on how old your teen is, they might not have bills or required spending just yet. But starting to talk about the 50/30/20 rule now can help build awareness for how people put 50% of their income toward needs, 30% toward wants and 20% toward savings.
Start these habits now by encouraging your teen to always put 20% into savings. Then they can put 30% toward their goals and allow themselves to spend the 50% on going out with friends or purchasing new apparel. It’s a different breakdown than what they’ll do once they have bills, but it gets them thinking about expense categories and where their money is going.
5. Track Spending
Show your child where their funds are going. Set up a budgeting app just for them and help them track the spending categories where their money is going.
The visualization of funds can help children build healthy money habits. They might think twice before dropping $20 at the arcade or consider ways they can buy their sports equipment used once they see how it factors into their total spending. Your child might go from thinking they had great spending habits to seeing flaws in their spending or having a greater appreciation for what things cost and how to balance those expenses month-to-month.
6. Help Them Find a Job
A 13-year-old can’t get a traditional job. But they might be able to mow lawns, babysit or start a side hustle. As they get older, they can apply for more traditional work at local restaurants or grocery stores.
Get creative about how your teen can make money. Encourage them to build skills and market those skills to neighbors. Consider whether they could walk dogs during summer break, help clean homes or do laundry for people. Make it age-appropriate to ensure you don’t end up with another job yourself.
They can carry those skills into more traditional employment when they are old enough, have transportation and can manage their work schedule.
7. Start Making Trade-Offs
You want your child to have a great life and enjoy their youth. But be careful not to just buy them everything they want. Start making trade-offs when your child is old enough to understand budgeting and how money is finite.
Encourage them to shop second-hand for sporting equipment, apparel or other items to save money. Explain how designer brands don’t necessarily last longer and are often a passing craze. They don’t need to have all the best of the best. Plus, shopping second-hand can help the environment by encouraging manufacturers not to keep making goods, which can cause pollution.
8. Encourage Social Gatherings That Are Financially Responsible
Teens enjoy going out and having experiences. The challenge is that most teens don’t have money to spend on these outings, and they have no context for how much money they spend with their friends. To them, it’s just a $5 fancy coffee here and a $10 movie ticket there. They don’t realize that by the end of the month, they’ve spent a few hundred dollars.
Show teens how they can make food at home for far less. Encourage them to recommend going to parks with their friends, looking for free events and going to local concerts for rising musicians instead of spending hundreds of dollars on one concert ticket. That’s not to say they can never see their favorite artist, but building moderate habits that match their income will help them learn how to balance their lifestyle with their income.
9. Manage Online Spending
Buying online is easy. With one click, you can spend money you weren’t planning to. When the parent was a child, they likely had to go through a lot more to spend money because they had to get to the store, shop around and use cash to finalize the purchase where they could physically see what they were spending money on and how it compared to what was in their wallet.
Encourage teens to leave items in their shopping cart for a few hours and come back. That way, they ensure they’ve thought about the purchase thoroughly and aren’t being impulsive. Talk about the results from their budgeting app before finalizing the purchase so they get disciplined in considering their budget before completing a purchase to ensure the ease of online shopping doesn’t destroy their budgets.
10. Demonstrate How Debt Affects Spending Power
Allow children to be in debt to you for items they don’t want to wait to purchase. They need a real demonstration of how debt affects their spending power. This might encourage them to avoid buying items like TVs or couches on credit instead of waiting until they’ve saved enough money for the purchase.
When they don’t have the funds to purchase a pair of shoes they just have to have or a new video game that hit the market, buy it for them, and allow them to make payments to you. It’s a small and controlled way of teaching them about debt. Make sure you talk about it regularly and keep a running tab of what they owe you for the item and how long it will take them to pay it off. Celebrate paying off the debt and showcase what it does for their finances.
Set Teens Up for Financial Success
Budgeting and smart financial decisions are learned habits. As such, you want to start teaching them to your child now so that they have those skills when they start making their own financial decisions. Follow these tips to build financially savvy children.
About Rebekah Brately
Rebekah Brately is an investment writer passionate about helping people learn more about how to grow their wealth. She has more than 12 years of writing experience, focused on technology, travel, family and finance. Her work has been published in Benzinga, Hearst Bay Area, FreightWaves and Dallas Observer publications.