We’ve already discussed the importance of helping your teen learn how to save money responsibly, so today let’s look at some easy steps to take to achieve this goal.
1. Talk to your teen. Once you’ve unplugged your teenager from whatever device(s) they are better at using than you are, a simple conversation about savings can be a helpful place to start. Explain to your teen that as they become an adult, along with the greater freedoms they will enjoy (pizza at 3 in the morning!) comes taking on a greater share of responsibility for their own lives. Hopefully they are already bathing regularly (if not, maybe have that conversation first.) Assuming your teen already smells semi-fresh, explain that having money is a little more complicated than just getting a job, because “having money” can actually be divided into two parts: getting money, and keeping money. Having a job is important for getting money, but it won’t help you keep it. So how do we keep money?
2. Encourage good spending habits. One of the best ways to keep money is to refrain from spending it on things we don’t need. Teenagers are not exactly famous for their impulse control, but learning how to resist spending money now in order to keep it for later is essential. One way to think of it: Because of the way we as human beings are all wired, we attach a lot more importance to things we want right now than to things that we know we will want in the future. Our appetites and desires in the present are SO MUCH MORE IMPORTANT than whatever wants and needs we may have in the future. But it does not have to be this way. Present-tense ‘You’s’ brain is a greedy little dictator who is very willing to screw over ‘Future You’ to get what he wants RIGHT NOW. And well, dictatorships suck. Realize that when your brain is screaming that OMG YOU NEED THAT DRESS/VIDEO GAME/PAIR OF SNEAKERS RIGHT NOW, it is lying to you. You don’t need those things, and by holding off on buying them now, you will be able to buy, bigger, cooler, more expensive stuff in the future (flying cars, matching outfits for you and your avatar, etc.)
3. Open a savings account. Once you’ve introduced the idea that saving money perhaps does not totally suck, setting up your teen with their personal savings account is a good next step. It’s a good idea to use the same bank/savings institution that you already use, and a lot of banks even have introductory programs and accounts targeted at young adults (banks are very interested in bringing in new customers and establishing that all-important brand loyalty). Make sure to include your teen in this process as much as possible—the more involved they are, the more the account will feel like theirs.
4. Learn how to manage a budget. If your teen already has a job or an allowance, they can learn how to keep track of how much they currently have, how much they can plan on earning in the near future, and how much they will want to have set aside in their savings account. There are lots of budgeting tools available online; Mint.com is a good place to start, and learning how to use their own banks’ online side is also important.
5. Plan some longer-term savings goals. One good way to do this is to plan out some purchases for the year. Does your teen want a new smartphone? Look up the price with them online; discuss how much of it you would be willing to pay for, and how much they will need to cover the rest. Then break down how much they will want to save each month to have that money ready to go when that hot new phone comes out.
6. Teach incremental saving. With savings, the good news is that a little can go a long way. By putting aside a little bit of money consistently, your teen can build up quite the little nest egg without ever feeling the sting too much at any given time. It is much easier to save $30 a month for six months than to introduce draconian austerity measures at the last minute when trying to make a bigger purchase. Also, by putting some money aside bit by bit even if they don’t have something specific they are saving for right now, when that next Really Cool Thing comes along and they want it immediately, they will already be able to afford it. Call it delayed instant gratification.
7. Introduce automatic savings. With all due modesty, this is where SavedPlus can help. With SavedPlus, you and your teen can set savings targets and goals, and choose a percentage of their money that they want to set aside automatically every time they spend. SavedPlus will automatically transfer that money (say 5%) to their savings account every time they make a purchase. When saving is automatic, it’s painless. And at the end of the month, the teen can check their statement and find out that, they’ve got a bunch of extra money they didn’t even know they were saving! Holy crap, this feels great! Congratulate them on their savvy financial acumen. Then see if they will take you out for dinner, now that they are basically millionaires.
So that’s it: a pretty good start. The best part about learning how to save early is that it gets easier the more you do it. By the time your teen is really out on their own and having to pay for things they don’t want but do need (flying car payments, a mortgage on their space condo, toilet paper) they will already have developed the skills necessary to keep track of their money and save it accordingly. And you will rest easy, knowing that you are The Most Amazing Parent Ever. So it’s a win-win, basically.