The teenage years are full of new experiences, which may include a first job. Whether it’s scooping ice cream at a local shop or babysitting for the neighbor down the street, it’s a time when your teen is earning money on their own. While it’s important to be a kid, it’s also a great idea to begin educating your teen on how to save money. As a teen, I never had someone monitoring my paychecks and wish I had saved more during my initial years of employment.
1. Set up an Account
If your son or daughter doesn’t already have a bank account, we recommend setting up a savings and/or checking account to begin. While a piggy bank works fine, having their own account will help them learn about banking – something they will likely use every day in the future. Taking ownership and responsibility of money is another great aspect that comes with having a bank account.
2. Have Goals
Set goals with your teen and allow them to think about what they want to save for. Maybe it’s for a car, their college fund, or even a new video game. Having a short-term and long-term goal can be beneficial for a teenager. Short-term goals will provide a quick reward while still implementing the skills to achieve long-term goals. Whatever it may be, it’s great to have those goals in place to understand why they are saving. Setting a goal is the most crucial step in successfully saving. Without a plan, it’s easy to quickly spend through money intended for the future.
3. Understand Income
It’s likely that your teen will have a varying income, meaning their paychecks won’t be the same every pay period. If this is the case, estimating weekly or biweekly income will be necessary when setting a monetary value to their goals. If they have a set income, then they will easily be able to determine their monthly total. If your teen receives a paycheck, then this is also a great time to start talking about income taxes and how their check will be affected.
4. Determine Bills
Are there any bills that your teen will now be responsible for? This money will need to be set aside before they can use their income for savings. While saving is essential, their bills must be paid first and that’s an important skill to learn. Emphasize that bills are not the same as entertainment expenses, such as going out to dinner with friends. Small steps in understanding these differences can go a long way for a young teen.
5. Set an Amount to Save
Now that they’ve discovered what money is left after paying their bills, it’s time for your teen to determine how much they can save per paycheck. During this step in the process, keep in mind the goals that were set in the beginning. How much are you able to save toward your goals? That might be saving $20 each week or setting a percentage to save per paycheck.
6. Have Fun!
While it’s important to save money, the teenage years shouldn’t be a time to begin the cycle of money stress. Teaching balance is the key to ensuring your teen will be set up for success while still enjoying their beginning years of employment!